In the Q2 earnings season, the Finance sector turned out 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.
Synovus Financial Corporation (SNV - Free Report) is one such stock. Interest income growth, pruning of assets, improving credit quality and a strong capital position are major driving factors. However, escalating expenses remain concerns.
Continued loan growth and expansions aided the company to surge 29.9% compared with 24.5% growth recorded by the industry it belongs to.
Further, the company’s earnings estimates remained unchanged for the current year, for the last seven days. As a result, it carries a Zacks Rank #3 (Hold).
Synovus is focused on its organic growth strategy. This is reflected by consistent loan growth over the past few years, along with net interest income (NII), partly driven by the acquisitions completed during this period. Further, the company is well poised to enhance its NII in the quarters ahead, driven by steady growth in loan demand and gradual economic recovery. Notably, the rising interest-rate environment has eased margin pressure to an extent.
Synovus remains committed to creating value for its shareholders through dividend hikes, share buybacks and acquisitions, thereby reflecting a strong balance-sheet position. In October 2016, the company acquired Entaire Global Companies, Inc. The deal is anticipated to be immediately accretive to its earnings per share, return on equity and return on assets (excluding merger-related costs). Recently, the company agreed to buy Cabela's banking operation. Further, the board of directors plans to repurchase up to $200 million shares in 2017. Also, in March 2017, a 25% hike in quarterly dividend was announced.
Synovus has been substantially reducing the percentage of loans in its residential construction and development, and land acquisition portfolios. Also, credit quality trends though volatile, are expected to display broad-based improvement. This is likely to continue with relatively flat non-performing assets and net charge-offs expected within the 15-20 basis points (bps) range in 2017.
Despite certain cost-saving initiatives, Synovus has been witnessing a rise in expenses. Also, management expects expenses to rise (2-4% in 2017) further with continued investments in technology, talent and to improve customer experience.
Stocks to Consider
LPL Financial Holdings Inc. (LPLA - Free Report) has been witnessing upward estimate revisions for 60 days. In a year’s time, the company’s share price has soared more than 58%. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Raymond James Financial, Inc. (RJF - Free Report) has been witnessing upward estimate revisions for 60 days. Further, the stock has surged nearly 39.2% in a year’s time. It currently carries a Zacks Rank #2.
E*TRADE Financial Corporation (ETFC - Free Report) has been recording upward estimate revisions for the same time frame. Additionally, the company’s shares have jumped nearly 60.5% in a year’s time. It currently holds a Zacks Rank #2.
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