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4 Reasons to Add UMB Financial (UMBF) to Your Stock Portfolio

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UMB Financial Corporation (UMBF - Free Report) is well-positioned for growth, driven by a solid loan and deposit balance, higher interest rates and a decent liquidity profile. Hence, adding the stock to your portfolio now seems a wise idea.

The Zacks Consensus Estimate for UMB Financial’s 2024 and 2025 earnings have been revised upward by 3.7% and 3.1%, respectively, over the past 30 days, indicating that analysts are optimistic regarding its earnings growth potential. UMBF currently carries a Zacks Rank #2 (Buy).

Over the past six months, the company’s shares have gained 24.2% compared with the industry’s growth of 13%

Zacks Investment Research
Image Source: Zacks Investment Research

Now, let’s discuss some of the important factors that make UMBF stock worth a look.

Revenue Strength: UMB Financial has been witnessing steady revenue growth. The company’s revenues witnessed a compound annual growth rate (CAGR) of 6.8% in the last five years (2018-2023). Further, the company’s loans and deposits saw a CAGR of 13% and 9.8%, respectively, in the last three years (2019-2023). The strong loan and deposit balances are likely to support financials.

The company’s net interest income (NII) witnessed a CAGR of 8.2% over the last four years (ended 2023). The Federal Reserve’s signal to keep rates high in the coming quarters, along with decent loan demand, will support NII in the upcoming period.

UMBF has strategically diversified revenue streams to non-interest sources in order to reduce exposure to spread income. The metric recorded a CAGR of 6.2% in the last four years (ended 2023). The company's investment in revenue-generating capabilities is poised to aid top-line growth. Diverse business lines and verticals will sustain the company’s non-interest income growth.

Revenues are expected to grow 1.7% and 5.1% in 2024 and 2025, respectively.

Earnings Growth: UMB Financial’s earnings have witnessed growth of 20.9% over the past three to five years. The company’s earnings are projected to decline 8.9% in 2024, while it will likely rebound and grow 3.7% in 2025.

Solid Balance Sheet: The company’s debt/equity ratio of 0.12 is below the industry average of 0.28. This reflects UMBF’s strong liquidity profile.

Further, as of Dec 31, 2023, UMB Financial’s debt was $2.18 billion, and cash and dues from the bank and interest-bearing deposits with banks were $5.61 billion. The company has a decent liquidity position and is expected to meet its debt obligations even during the current economic volatility.
Capital Redistribution: UMBF has an attractive capital distribution plan. Since 2002, the company has been raising dividends annually, with the most recent hike of 2.6% announced in October 2023.

UMB Financial has a share repurchase plan as well. During the third quarter of 2023, it approved the repurchase of up to one million shares of its common stock. The plan will expire on Apr 30, 2024.

With solid liquidity and a favorable debt/equity ratio and payout rate compared with the industry, the company's capital-distribution activities seem sustainable.

Other Stocks to Consider

Some other top-ranked stocks from the finance space are First Busey Corp. (BUSE - Free Report) and Park National Corp. (PRK - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

BUSE’s 2024 earnings estimates have increased 5.4% over the past 30 days. Shares of First Busey have gained 13.6% over the past six months.

PRK’s 2024 earnings estimates have increased 4.9% over the past 30 days. Shares of Park National have jumped 25.8% in the past six months.

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