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6 Factors That Make Associated Banc-Corp (ASB) Worth Buying

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Given the extreme market volatility on the back of macroeconomic and geopolitical concerns, investors are shying away from investing in stocks. Despite this, there are a number of stocks worth considering based on strong fundamentals and prospects. One such banking stock is Associated Banc-Corp (ASB - Free Report) .

The company’s organic and inorganic growth efforts are likely to continue enhancing profitability. ASB is also undertaking steps to strengthen its lending capabilities to improve revenues.

The company is witnessing upward earnings estimate revisions, reflecting analysts’ optimism regarding its earnings growth potential. In the past 30 days, the Zacks Consensus Estimate for earnings moved 11.7% and 1.9% upward for 2022 and 2023, respectively. ASB currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Associated Banc-Corp have lost 11.8% so far this year compared with the industry's 7.4% decline.

 

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Here’s Why the Stock is an Attractive Pick

Earnings Growth: In the past three to five years, Associated Banc-Corp recorded earnings growth of 2.2%.  Though the company’s earnings are expected to decline 3.7% this year, the same is projected to rebound and grow 5% in 2023.

Over the next three-five years, the company’s earnings are expected to grow 8%, thus rewarding long-term investors.

ASB also has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 26.08%.

Revenue Strength: Associated Banc-Corp is witnessing a steady improvement in revenues. Though total revenues declined last year, the company expects expansion of its lending capabilities (as part of its new strategic plan) to help drive incremental revenues, going forward.

Further, robust loans and deposit balances, rising rates and efforts to improve fee income will support the top line. Management projects net interest income to exceed $890 million and non-interest income to be in the range of $290-$300 million this year.

Revenues are expected to grow 11.2% for 2022 and 9.6% for 2023.

Strategic Business Restructuring Plan: Associated Banc-Corp has been undertaking several measures to improve operating efficiency. In September 2021, the company announced a new expansion plan, which has already boosted its lending capabilities and will support core business growth and transform digital capabilities.

Driven by these, management expects auto finance loan balances to touch $2.5 billion, asset-based lending and equipment finance loans balances to be $600 million and commercial loans balances to reach $18 billion by 2023-end. To fund these efforts, ASB has been taking steps that include branch and back-office facilities consolidation.

Opportunistic Buyouts: Associated Banc-Corp is restructuring its business to continue focusing on core operations. In 2021, the company sold its wealth management subsidiary Whitnell & Co., while in 2020, it divested the insurance business, Associated Benefits & Risk Consulting.

ASB is expanding inorganically too. In 2020, the company acquired First Staunton Bancshares, and in 2019 it took over 32 branches in Winconsin. In the first half of 2018, it acquired Anderson Insurance, Diversified Insurance Solutions and Bank Mutual. These deals are expected to be accretive to the company’s earnings.

Steady Capital-Deployment Activities: Associated Banc-Corp is committed to enhancing shareholders’ value. The company has been raising dividends on a regular basis, with the last one announced in July 2021. Based on the last day’s closing price of $19.94, the company’s quarterly dividend of 20 cents per share currently yields 3.96%. This is impressive compared with the industry average of 2.43%.

While ASB suspended share buybacks in 2020 to enhance liquidity amid the coronavirus-related concerns, it resumed the same in first-quarter 2021. In October 2021, ASB announced an additional share repurchase authorization worth up to $100 million. As of Jun 30, 2022, $80 million worth of authorization remained available.

Stock Seem Undervalued: Associated Banc-Corp looks undervalued now compared with its broader industry. It currently has a price-to-earnings ratio of 9.50, lower than the industry average of 9.92. Also, its price-to-book ratio of 0.81 is below the industry’s 1.21.

Also, ASB has a Value Score of B. The Value Style Score condenses all valuation metrics into one actionable score, which helps investors steer clear of 'value traps' and identify stocks that are truly trading at a discount.

Other Banks To Consider

A couple of other banks worth considering amid the current market backdrop are Commerce Bancshares, Inc. (CBSH - Free Report) and Zions Bancorporation (ZION - Free Report) . Both CBSH and ZION currently carry Zacks Rank of 2.

Commerce Bancshares’ Zacks Consensus Estimate for 2022 earnings has moved 3.9% upward to $4.04 over the past 30 days. So far this year, CBSH’s shares have gained 2.6%.

Zions’ Zacks Consensus Estimate for 2022 earnings has been revised 4.1% upward to $5.90 over the past month. ZION’s shares have lost 15.6% in the year-to-date period.


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Zions Bancorporation, N.A. (ZION) - free report >>

Commerce Bancshares, Inc. (CBSH) - free report >>

Associated BancCorp (ASB) - free report >>