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5 Reasons Why Associated Banc-Corp (ASB) Stock is Worth Buying
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Amid extreme market volatility and recession risk on macroeconomic and geopolitical headwinds, 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 expansion efforts, focus on fee income, inorganic expansion initiatives, decent loan growth and higher rates are likely to continue supporting 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 60 days, the Zacks Consensus Estimate for earnings moved marginally and 1% upward for 2022 and 2023, respectively. ASB currently carries a Zacks Rank #2 (Buy).
Shares of Associated Banc-Corp have rallied 23.3% over the past six months, outperforming the industry's 9.7% increase.
Image Source: Zacks Investment Research
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%. The momentum is expected to continue in the near term. The company’s earnings are expected to rise 5.1% for 2022 and 2.8% for 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 19.47%.
Revenue Strength: Associated Banc-Corp is witnessing a steady improvement in revenues. Though total revenues declined in 2021, 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 interest rates and efforts to improve fee income will support the top line. Management expects total revenues to exceed $1.225 billion in 2022.
Revenues are expected to grow 16.6% for 2022 and 12.6% 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. The efforts include the addition of “higher-margin” lending portfolios and digital investments, which are expected to bolster revenues, operating leverage and profitability over time.
Driven by these, management expects auto finance loan balances to touch $2.45 billion, asset-based lending and equipment finance loans balances to be $650 million and commercial loan balances to be more than $18 billion by 2023-end.
Steady Capital-Deployment Activities: Associated Banc-Corp is committed to enhancing shareholders’ value. The company has been raising dividends regularly, with the last one announced in October 2022. Based on the last day’s closing price of $22.91, the company’s quarterly dividend of 21 cents per share currently yields 3.69%. This is impressive compared with the industry average of 2.54%.
While ASB suspended share buybacks in 2020 to enhance liquidity amid 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 Sep 30, 2022, $80 million worth of authorization remained available.
Stock Seem Undervalued: Associated Banc-Corp looks undervalued compared with its broader industry. It currently has a price-to-cash flow ratio of 7.20, lower than the industry average of 8.26. Also, its price-to-book ratio of 0.91 is below the industry’s 1.26.
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.
The consensus estimate for CF Bankshares’s 2022 earnings has been revised 5% upward over the past 30 days. Over the past six months, CFBK’s share price has increased 3.7%.
Mid Penn Bancorp’s 2022 earnings estimates have remained unchanged over the past 30 days. MPB’s shares have gained 13.8% over the past six months.
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5 Reasons Why Associated Banc-Corp (ASB) Stock is Worth Buying
Amid extreme market volatility and recession risk on macroeconomic and geopolitical headwinds, 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 expansion efforts, focus on fee income, inorganic expansion initiatives, decent loan growth and higher rates are likely to continue supporting 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 60 days, the Zacks Consensus Estimate for earnings moved marginally and 1% upward for 2022 and 2023, respectively. ASB currently carries a Zacks Rank #2 (Buy).
Shares of Associated Banc-Corp have rallied 23.3% over the past six months, outperforming the industry's 9.7% increase.
Image Source: Zacks Investment Research
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%. The momentum is expected to continue in the near term. The company’s earnings are expected to rise 5.1% for 2022 and 2.8% for 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 19.47%.
Revenue Strength: Associated Banc-Corp is witnessing a steady improvement in revenues. Though total revenues declined in 2021, 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 interest rates and efforts to improve fee income will support the top line. Management expects total revenues to exceed $1.225 billion in 2022.
Revenues are expected to grow 16.6% for 2022 and 12.6% 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. The efforts include the addition of “higher-margin” lending portfolios and digital investments, which are expected to bolster revenues, operating leverage and profitability over time.
Driven by these, management expects auto finance loan balances to touch $2.45 billion, asset-based lending and equipment finance loans balances to be $650 million and commercial loan balances to be more than $18 billion by 2023-end.
Steady Capital-Deployment Activities: Associated Banc-Corp is committed to enhancing shareholders’ value. The company has been raising dividends regularly, with the last one announced in October 2022. Based on the last day’s closing price of $22.91, the company’s quarterly dividend of 21 cents per share currently yields 3.69%. This is impressive compared with the industry average of 2.54%.
While ASB suspended share buybacks in 2020 to enhance liquidity amid 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 Sep 30, 2022, $80 million worth of authorization remained available.
Stock Seem Undervalued: Associated Banc-Corp looks undervalued compared with its broader industry. It currently has a price-to-cash flow ratio of 7.20, lower than the industry average of 8.26. Also, its price-to-book ratio of 0.91 is below the industry’s 1.26.
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 bank stocks worth a look are CF Bankshares Inc. (CFBK - Free Report) and Mid Penn Bancorp (MPB - Free Report) . CFBK currently sports a Zacks Rank #1 (Strong Buy) and MPB carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for CF Bankshares’s 2022 earnings has been revised 5% upward over the past 30 days. Over the past six months, CFBK’s share price has increased 3.7%.
Mid Penn Bancorp’s 2022 earnings estimates have remained unchanged over the past 30 days. MPB’s shares have gained 13.8% over the past six months.