For Immediate Release
Chicago, IL – January 18, 2022 – Zacks Equity Research Shares The Bank of New York Mellon (
BK Quick Quote BK - Free Report) of as the Bull of the Day, Huazhu Group Limited ( HTHT Quick Quote HTHT - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Amerant Bancorp Inc. ( AMTB Quick Quote AMTB - Free Report) , Live Oak Bancshares, Inc. ( LOB Quick Quote LOB - Free Report) and Triumph Bancorp, Inc. ( TBK Quick Quote TBK - Free Report) . Here is a synopsis of all five stocks: The Bank of New York Mellon, a Zacks Rank #1 (Strong Buy), is a long-term stock market winner within the Zacks Finance sector. The stock hit an all-time high earlier this month before experiencing a mild pullback over the past week as the market has continued its recent move lower. BK sports the highest Zacks Momentum Style Score of A, and this short-term decline is providing investors with a solid buying opportunity. BK is benefitting from an overall uptrend in financials as the Fed is set to embark upon its rate-hike journey over the next several years. Company Description
BNY Mellon is a global investment company that provides a range of financial products and services and is dedicated to assisting clients in managing their financial assets throughout the investment lifecycle. Founded in 1784, BK offers investment services in 35 countries and is headquartered in New York, NY.
The firm operates in three segments: Investment Services, Investment and Wealth Management, and Other. The Investment Services segment provides activities such as trust and depositary, custody, accounting, transfer agency, securities lending, clearing, and enterprise data management. BK’s Investment and Wealth Management segment offers wealth and estate planning, private banking, and investment management products. The Other segment participates in services such as corporate treasury, leasing, and business exit strategies.
Recent Earnings and Future Estimates
Tuesday’s Q4 earnings announcement showed adjusted EPS of $1.04, a 1.96% beat over the $1.02 Zacks Consensus Estimate. The bottom line represented growth of 6% from the prior-year quarter. Higher fee income and growth in asset balances provided tailwinds for the Q4 results. Net income applicable to common shareholders rose to $881 million, up 1% year-over-year. Total revenues grew 5% versus the same quarter in 2020 to $4.04 billion, beating the Zacks Consensus Estimate of $3.97 billion.
Last year, BK posted total EPS of $4.18 which handily beat expectations of $3.93 by 6.4%. BNY Mellon boasts an impressive history in terms of earnings surprises, surpassing consensus estimates in each of the past eleven quarters. The company has delivered a trailing four-quarter average surprise of 6.55%.
The trend for earnings estimates is showing positive revisions as of late with current-year EPS estimates increasing by 4.69% in the past 60 days. Analysts are expecting 2022 EPS of $4.69, representing growth of 12.2% relative to last year. Revenues are anticipated to climb by 3.84% to $16.54 billion.
Charting the Course
BNY Mellon has advanced over 115% from the March 2020 bottom and is showing recent signs of relative strength. The stock continues to make a series of both 52-week and all-time highs and is up 2% this year while the S&P 500 is down over 4%. New highs are a sign of strength and indicate that institutional buying remains solid. BK is looking to find support at its 50-day moving average and the recent earnings beat may help provide a floor for any further selloff in the stock.
BK is part of the Zacks Banks – Major Regional industry group which ranks in the top 10% out of all 254 industry groups. Historical research has shown that roughly half of a stock’s future price movement can be attributed to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. With BNY Mellon in a top industry group, the stock will likely continue to experience a tailwind in terms of performance. Consensus earnings estimates will also provide a boost, moving up and to the right which is what investors like to see:
The Bank of New York Mellon Corporation Near-Term Outlook
The company maintains a solid balance sheet with cash and equivalents of $133.7 billion, far outpacing the total debt of $42.9 billion. BK boasts investment grade ratings of A1/A/AA- and a stable outlook from Moody’s, S&P, and Fitch, respectively. If an unforeseen negative economic event were to occur, the company should have no problem continuing to meet its debt obligations.
BK recently authorized share buybacks totaling $6 billion through the fourth quarter of 2022 and announced a dividend hike of +9.7% relative to prior levels. With a strong capital position, the company is expected to sustain its capital deployment programs.
BNY Mellon’s global expansion initiatives, durable assets under management (AUM) balance, and meticulous expense-management programs should support company financials in the near future. In July 2021, the firm announced its purchase of the Milestone Group, and last month BK inked a deal to buy Optimal Asset Management. As of September 30
th 2021, BK had $2.3 trillion in AUM. Bottom Line
With a history of surpassing earnings estimates and an improving future outlook, BNY Mellon represents a great opportunity. The Zacks #1 Strong Buy stock is a compelling investment with an attractive dividend yield (2.16%) and strong price momentum.
Solid institutional buying and a high-performing industry group should continue to provide a tailwind for the stock price. Recent positive earnings estimate revisions will help to provide a cushion during any potential market decline. If you’re looking for a way to diversify your portfolio, make sure to put BK on your shortlist.
Huazhu Group Limited is a hotel operator and franchisor primarily in China. The company focuses on economy and midscale hotel segments and operates over 7,000 hotels. Formerly known as China Lodging Group, HTHT was founded in 2005 and is based out of Shanghai. The Zacks Rundown
Huazhu Group, a Zacks #5 Rank (Strong Sell), experienced a climax top in February 2021 and has been in a price downtrend for nearly the past year. The stock is hitting a series of 52-week lows and represents a compelling short opportunity as the market continues its volatile start to the year.
HTHT is part of the Zacks Hotels and Motels industry group, which is currently ranked in the bottom 9% out of all 254 industry groups. We expect this industry group to underperform the market over the next three to six months. Candidates in the worst-performing industries can often represent good shorting opportunities, as their industry performance provides a headwind to any rally attempts.
Recent Earnings and Future Estimates
Over the past three years, HTHT has missed earnings estimates in seven of the twelve quarters. The company has posted a trailing four-quarter average earnings miss of -48.29%. Consistently falling short during earnings season is a recipe for underperformance. Back in November of last year, HTHT reported a Q3 loss of $-0.07, a -200% miss from the $0.07 gain that was expected.
Analysts have been revising future estimates downward as of late, with 2022 EPS consensus declining by -49.62% to $0.67. Consensus earnings estimates are falling across the board along with the stock, a good sign for the bears:
Huazhu Group Limited Price, Consensus and EPS Surprise Technical Outlook
The stock entered a downtrend last year and has been steadily falling ever since. Its 200-day moving average acted as resistance during the summer and fall months last year, with a decisive move lower in late November.
HTHT stock has continued its descent to kick off the new year, falling nearly -7% this month. Even with the recent price decline, the stock is still relatively overvalued which could hurt performance in the short-term.
A variety of headwinds including the continued COVID-19 pandemic will continue to negatively impact company performance. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, fostering the stock’s downtrend.
HTHT’s characteristics have resulted in an overall “D” VGM score, and the company is part of an industry group that ranks in the bottom 9% of all Zacks Ranked Industries. Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy.
Additional content: ii Don't Waste This Opportunity to Buy These 3 Bank Laggards
After an impressive 2021, this year is turning out to be a bit disappointing for the stock markets. All the three major indices – the S&P 500, the Dow Jones Industrial Average and the Nasdaq – are in deep red since the beginning of 2022.
So, what’s fueling the sell-offs? Well, there has been increasing speculation that the Federal Reserve will be more aggressive in its efforts to tackle inflation and likely announce more than 25 basis points hike in interest rates in its March FOMC meeting. This has driven the benchmark U.S. Treasury yields up, with the 10-year yields touching the highest level since January 2020.
Moreover, the ongoing Q4 earnings are turning out to be lackluster. Many banks that have reported results so far haven’t been able to meet market expectations (both in terms of quarterly performance and management guidance). Thus, this weighed heavily on the major indexes and bank stocks.
But with interest rate hikes imminent and the U.S. economy remaining strong, you can turn this scenario into a buying opportunity. We have chosen –
Amerant Bancorp Inc., Live Oak Bancshares, Inc. and Triumph Bancorp, Inc. – as these will benefit from the hawkish Fed stance and robust economy.
Since March 2020, banks have been witnessing contraction of the net interest margin (NIM) owing to the central bank's accommodative monetary policy and near-zero interest rates. So, sooner and bigger-than-expected rate hikes will come as a breather for banks and improve margins and net interest income (NII), which constitutes a major portion of the revenues.
Further, robust economic growth and a decent rise in loan demand are set to drive NIM and NII. Banks are also undertaking initiatives to restructure operations to diversify their footprint and revenue base. Efforts to focus on non-interest income are likely to bolster banks’ top-line growth.
Based on these developments, investing in bank stocks will be highly profitable. The short-listed banks have lost more than 2% year to date, thus providing you a good entry point after their resounding 2021 performance wherein these stocks had surged more than 50%.
Further, these banks have witnessed positive earnings estimate revision for 2022 over the past two months. Also, all three banks have a market cap of not less than $1 billion and currently carry a Zacks Rank #2 (Buy). You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Amerant Bancorp: Headquartered in Coral Gables, FL, AMTB provides banking products and services to individuals and businesses in the United States and across the globe. The company, the second-largest community bank headquartered in Florida, operates through 24 banking centers.
As of Sep 30, 2021, AMTB had $7.5 billion in total assets, $5.2 billion in net loans held for investments and $5.6 million in total deposits. Also, Amerant is expected to keep benefiting from solid loans and deposit balance, efforts to strengthen fee income sources and an improving economy. These will likely drive revenues going forward.
In September 2021, Amerant announced an authorization to repurchase up to $50 million of its Class A shares. The stock, which has a market cap of $1.3 billion, had soared 127.3% last year but has lost 2.5% so far this year. AMTB’s 2022 earnings estimates have been revised 7.4% upward over the past two months.
Live Oak Bancshares: Providing various commercial banking products and services in North Carolina, Live Oak Bancshares operates a national online platform for small business lending and deposit gathering. Being branchless has supported LOB’s financials immensely amid the pandemic.
As of Sep 30, 2021, Live Oak Bancshares had $8.1 billion in total assets, $5.4 billion in net loans and leases and $6.8 million in total deposits. Based in Wilmington, NC, the bank has strengthened its revenue base mainly on the back of solid loan demand.
LOB has been paying a regular quarterly dividend of 3 cents per share. The stock, which has a market cap of $3.3 billion, had surged 83.9% in 2021 but has lost 13.4% in the year-to-date period. LOB’s earnings estimates for 2022 have moved marginally upward over the past 60 days.
Triumph Bancorp: Offering a diversified range of banking, payments and factoring services, Triumph Bancorp operates through almost 60 branches across Iowa, Illinois, Colorado, New Mexico, Kansas and Texas. As of Sep 30, 2021, TBK had total assets of $6 billion, total loans held for investment of $4.8 billion and total deposits of $4.8 billion.
Dallas, TX-based TBK has been recording strong top-line growth driven by solid loan balance and gradually improving economic backdrop. Further, the company’s credit quality is impressive.
Triumph Bancorp has a market cap of $2.8 billion. The company’s shares surged 145.2% last year but has lost 7.3% so far this year. TBK’s 2022 earnings estimates have been revised almost 1% upward over the past two months.
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