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Here's Why Arrow Financial (AROW) Stock is a Must Buy Now

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Though the U.S. regional banking crisis in early March hurt investor sentiments and turned them bearish on the sector, they have regained confidence. Also, the Federal Reserve has signaled the end of interest rate hikes this cycle and chances of three cuts in 2024. So, Arrow Financial Corporation (AROW - Free Report) stock looks like a promising investment option now.

Aided by higher interest rates and decent loan demand, AROW’s top line is expected to improve in the near term. Analysts are optimistic regarding the company’s earnings potential. The Zacks Consensus Estimate for earnings has been revised 13% and 12.6% upward for 2023 and 2024, respectively, over the past two months. It currently sports a Zacks Rank #1 (Strong Buy).

Shares of Arrow Financial have surged 43.2% in the past six months, outperforming the industry’s 21.6% rally.


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Factors That Make AROW Stock Worth Betting on

Earnings Growth: In the last three to five years, Arrow Financial witnessed earnings growth of 4.7%. Though the company’s earnings are expected to decline 36.5% in 2023, the trend is expected to reverse, and earnings are projected to jump 42.8% next year.

Revenue Strength: Arrow Financial’s revenues witnessed a CAGR of 8.6% over the last three years (2019-2022). Though the trend reversed in the first three quarters of 2023 because of increasing funding and deposit costs, the company entered into $300 million pay-fixed portfolio layer method fair value swaps in late September, which is expected to add more than $2 million in net interest income annually.

Thus, higher rates, decent loan demand and efforts to bolster fee income will continue to support the company’s top-line growth. Though AROW’s revenues are expected to decline 8.8% in 2023, the metric is anticipated to grow at the rate of 9.9% in 2024.

Solid Capital Distributions: AROW has been raising dividend payouts on a regular basis. In the last five years, the company hiked dividends six times.

Also, Arrow Financial has a share repurchase plan in place. In October 2023, the company expanded its existing stock repurchase program by $5 million. Thus, the total authorization under the repurchase program was $9.1 million as of Oct 26, 2023.

Given the company’s decent liquidity and balance sheet position, its capital distributions seem sustainable going forward.

Strong Leverage: Currently, Arrow Financial has a debt/equity ratio of 0.07. This compares favorably with the industry average of 0.39. Given the relatively low debt/equity ratio than its peers, the company is expected to be financially stable, even in adverse economic conditions.

Other Bank Stocks Worth Considering

A couple of top-ranked stocks from the banking space are WSFS Financial Corporation (WSFS - Free Report) and Hilltop Holdings (HTH - Free Report)

Earnings estimates for WSFS have remained unchanged for 2023 over the past 30 days at $4.47. The company’s shares have gained 27.3% over the past six months. WSFS Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hilltop Holdings’ earnings estimates have moved 1.9% north for the current year at $1.65 over the past 30 days. In six months’ time, HTH’s shares have gained 12.3%. The company sports a Zacks Rank #1 at present.

See More Zacks Research for These Tickers

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Hilltop Holdings Inc. (HTH) - free report >>

WSFS Financial Corporation (WSFS) - free report >>

Arrow Financial Corporation (AROW) - free report >>

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