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7 Reasons Why It's Worth Betting on Webster (WBS) Stock Now
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Webster Financial Corporation’s (WBS - Free Report) stock seems to be a profitable pick now, based on its underlying strength and earnings growth prospects. The factors that indicate upside potential in the stock include impressive organic as well as inorganic growth, cost-control efforts and sound capital-deployment activities.
In addition, it has been gaining analysts’ approval. The Zacks Consensus Estimates for earnings for 2022 and 2023 have been revised 1.4% and 5.6% upward, respectively, over the past 30 days. The stock currently sports a Zacks Rank #1 (Strong Buy).
Shares of Webster have gained 21.2% over the past six months compared with the industry’s growth of 17.1%.
Image Source: Zacks Investment Research
Here’s Why the Stock is Worth Buying:
Revenue Strength: Net interest income and non-interest income witnessed a compound annual growth rate ("CAGR") of 3.1% and 5.7%, respectively, over the last five years (2017-2021), with some annual volatility.
Additionally, the upward trend is expected to continue in the near term, driven by solid economic growth. Also, Webster’s merger deal with Sterling Bancorp is expected to help the former in diversification of commercial lending portfolios and unlocking new revenue growth opportunities.
Webster’s 2022 revenues are projected to grow 87.6%, whereas 2023 revenues will likely grow 12.4%.
Earnings Growth: Webster witnessed earnings growth of 10.8% in the past three to five years. Moreover, the company’s earnings are projected to grow 7% and 16.5% for 2022 and 2023, respectively.
Webster’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, delivering an earnings surprise of 19.91%, on average.
Cost Savings: The company is making efforts to manage costs through consolidation of banking centers and corporate facilities, process automation, ancillary spend reduction, and other organizational actions. Moreover, it closed 26 banking centers last year. Most of the strategic initiatives were completed in 2021 while some were paused as a result of the merger with Sterling and will be carried out throughout the integration of the firms. Webster intends to achieve the goal of $120 million in net reduction in operating expenses by 2023 end via its merger with Sterling.
Impressive Balance Sheet Position: Webster’s loans and deposits witnessed a CAGR of 6.2% and 9.2%, respectively, over a five-year period (ended 2021). Both loan and deposit balances are likely to get support from an improving economy. Further, management expects 8-10% annual total loan growth for the next couple of years as the economy improves, backed by a rise in business and consumer confidence.
Strong Leverage: Webster’s debt/equity ratio is 0.17 compared with the industry average of 0.22, indicating a relatively lower debt burden. It highlights the financial stability of the company even in adverse economic conditions.
Encouraging Capital Deployments: Webster had been raising its quarterly common stock dividend every year since 2010, the latest increase being 21% in April 2019. It did not announce any hike in 2020 due to the coronavirus-induced mayhem and suspended share repurchases for the merger with Sterling. The company’s capital-deployment activities seem sustainable, given its favorable debt/equity ratio relative to the industry.
Superior Return on Equity: Webster has a return on equity of 13.94% compared with the industry average of 12.43%. This indicates that the company is slightly more efficient in utilizing shareholder funds.
Image: Shutterstock
7 Reasons Why It's Worth Betting on Webster (WBS) Stock Now
Webster Financial Corporation’s (WBS - Free Report) stock seems to be a profitable pick now, based on its underlying strength and earnings growth prospects. The factors that indicate upside potential in the stock include impressive organic as well as inorganic growth, cost-control efforts and sound capital-deployment activities.
In addition, it has been gaining analysts’ approval. The Zacks Consensus Estimates for earnings for 2022 and 2023 have been revised 1.4% and 5.6% upward, respectively, over the past 30 days. The stock currently sports a Zacks Rank #1 (Strong Buy).
Shares of Webster have gained 21.2% over the past six months compared with the industry’s growth of 17.1%.
Image Source: Zacks Investment Research
Here’s Why the Stock is Worth Buying:
Revenue Strength: Net interest income and non-interest income witnessed a compound annual growth rate ("CAGR") of 3.1% and 5.7%, respectively, over the last five years (2017-2021), with some annual volatility.
Additionally, the upward trend is expected to continue in the near term, driven by solid economic growth. Also, Webster’s merger deal with Sterling Bancorp is expected to help the former in diversification of commercial lending portfolios and unlocking new revenue growth opportunities.
Webster’s 2022 revenues are projected to grow 87.6%, whereas 2023 revenues will likely grow 12.4%.
Earnings Growth: Webster witnessed earnings growth of 10.8% in the past three to five years. Moreover, the company’s earnings are projected to grow 7% and 16.5% for 2022 and 2023, respectively.
Webster’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, delivering an earnings surprise of 19.91%, on average.
Cost Savings: The company is making efforts to manage costs through consolidation of banking centers and corporate facilities, process automation, ancillary spend reduction, and other organizational actions. Moreover, it closed 26 banking centers last year. Most of the strategic initiatives were completed in 2021 while some were paused as a result of the merger with Sterling and will be carried out throughout the integration of the firms. Webster intends to achieve the goal of $120 million in net reduction in operating expenses by 2023 end via its merger with Sterling.
Impressive Balance Sheet Position: Webster’s loans and deposits witnessed a CAGR of 6.2% and 9.2%, respectively, over a five-year period (ended 2021). Both loan and deposit balances are likely to get support from an improving economy. Further, management expects 8-10% annual total loan growth for the next couple of years as the economy improves, backed by a rise in business and consumer confidence.
Strong Leverage: Webster’s debt/equity ratio is 0.17 compared with the industry average of 0.22, indicating a relatively lower debt burden. It highlights the financial stability of the company even in adverse economic conditions.
Encouraging Capital Deployments: Webster had been raising its quarterly common stock dividend every year since 2010, the latest increase being 21% in April 2019. It did not announce any hike in 2020 due to the coronavirus-induced mayhem and suspended share repurchases for the merger with Sterling. The company’s capital-deployment activities seem sustainable, given its favorable debt/equity ratio relative to the industry.
Superior Return on Equity: Webster has a return on equity of 13.94% compared with the industry average of 12.43%. This indicates that the company is slightly more efficient in utilizing shareholder funds.
Other Stocks to Consider
A couple of other stocks from the finance space that investors can consider are Morgan Stanley (MS - Free Report) and Fifth Third Bancorp (FITB - Free Report) . Both Morgan Stanley and Fifth Third Bancorp currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Morgan Stanley’s current-year earnings has been revised 4.2% upward over the past 60 days.
MS’s shares have risen 23.1% in the past year.
Fifth Third Bancorp recorded an upward earnings estimate revision of 3.3% for 2022 over the past 60 days.
The FITB stock has rallied 37.5% in the past year.