With the Q1 earnings season almost at its end, the Finance sector seems to be one of the best performers. So, we thought of bringing up a stock from the sector that reflects strong fundamentals and solid long-term growth opportunities.
The PNC Financial Services Group, Inc. (PNC - Free Report) is one such stock that not only beat estimates this time, but also has been witnessing upward estimate revisions, reflecting analysts’ optimism about its future prospects. Over the last 30 days, the Zacks Consensus Estimate for 2017 and 2018 increased 2.0% and around 1%, respectively.
Further, shares of this Zacks Rank #2 (Buy) stock have gained 13.6% in the last six months, outperforming 10.1% growth recorded by the Zacks categorized Regional Banks-Major industry.
Notably, PNC Financial has a number of other aspects that make it an attractive investment option.
5 Reasons Why PNC Financial is a Golden Egg
Revenue Growth: PNC Financial continues to make steady progress toward improving its top line. While a low-rate environment, though improving, is challenging for interest income growth, the company's fee income has grown at a five-year CAGR (2012-2016) of 3.6%, with a slight fall recorded in 2014 and 2016. The positive trend continued in first-quarter 2017.
The company’s projected sales growth (F1/F0) of 6.18% (as against the S&P 500 average of about 4.77%) indicates constant upward momentum in revenues.
Earnings Per Share Strength: Earnings are anticipated to display an upswing in the near term, as the company’s projected EPS growth (F1/F0) is 11.82% compared to the industry average rate of 10.87%. Also, PNC Financial recorded an average positive earnings surprise of 4.95%, over the trailing four quarters.
Prudent Expense Management: Though a marginal rise in non-interest expenses was experienced in 2016 and in first-quarter 2017, expenses declined at a CAGR of 2.5% for the last five years (2012-2016). Further, PNC Financial successfully realized its 2015 and 2016 continuous improvement savings program ('CIP') goals of $500 million and $400 million, respectively. For 2017, management anticipates CIP target of $350 million.
Steady Capital Deployment: PNC Financial remains focused on managing capital levels efficiently. This is well evident from the approval of the 2016 Capital Plan. Following the Federal Reserve’s approval, the company raised its quarterly common stock dividend by 8% and authorized a $2-billion share repurchase program. In Jan 2017, the company announced a $300-million increase in its common stock repurchase programs for the four-quarter period ending Jun 30, 2017, in addition to the share repurchase programs of $2 billion. Such capital deployment activities are likely to boost investors’ confidence.
Stock is Undervalued: PNC Financial has a P/E ratio and P/B ratio of 14.79x and 1.29x compared to the S&P 500 average of 18.78x and 3.24x, respectively. Based on these ratios, the stock seems undervalued.
Stocks to Consider
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 30 days. Additionally, the stock jumped over 19% over the past six months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Northern Trust Corporation (NTRS - Free Report) has been witnessing upward estimate revisions for the last 30 days. Also, the company’s shares have risen nearly 11.3% over the last six months. It presently holds a Zacks Rank #2.
Enterprise Financial Services Corp (EFSC - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 13%. It also carries a Zacks Rank #2.
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