During the last earnings season, the Finance sector was one of the best performers. Despite inflation-related issues and increasing chances of political uncertainty, we can add some banking stocks to our portfolio based on their 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 in Q2, 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 both 2017 and 2018 inched up around 1%.
Further, shares of this Zacks Rank #2 (Buy) stock have gained 5.6% so far, this year, outperforming 1.8% growth recorded by the industry it belongs to.
Notably, PNC Financial has a number of other aspects that make it an attractive investment option.
Why PNC Financial is a Must Buy
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 decline recorded in 2014 and 2016. The positive trend continued in the first half of 2017, as well on rising asset management revenues and other income.
The company’s projected sales growth (F1/F0) of 7.07% (as against the S&P 500 average of about 5.1%) 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 14.69% compared to the industry average rate of 12.54%. Also, PNC Financial recorded an average positive earnings surprise of 5.07%, over the trailing four quarters.
Prudent Expense Management: Though a marginal rise in non-interest expenses was experienced in 2016 and in the first half of 2017 on escalating personnel and equipment costs, 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.
Stock is Undervalued: PNC Financial has P/E and P/B ratios of 14.78 and 1.30 compared to the S&P 500 average of 18.70 and 3.15, respectively. Based on these ratios, the stock seems undervalued.
Other Key Picks
Other top-ranked stocks in the same space are FB Financial Corporation (FBK - Free Report) , LPL Financial Holdings Inc. (LPLA - Free Report) and Salisbury Bancorp, Inc. (SAL - Free Report) . All the stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FB Financial’s earnings estimates have been revised 2.7% upward for 2017, in the past 60 days. Also, its share price has surged 65.1% in the last year.
LPL Financial’s earnings estimates for 2017 have been revised 4.1% upward, over the last 60 days. Further, in a year’s time, the company’s shares have jumped 53.1%.
Salisbury Bancorp witnessed a 2.4% upward earnings estimates revision for the current year, over the last 60 days. Moreover, in the past year, its shares have gained 44.3%.
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