Favorable economic data, progress on tax-reform bill and positive comments by Jerome H. Powell — President Trump's nominee for the Fed chairman — have driven investors’ confidence in banking stocks. Therefore, some of these stocks are profitable additions to a portfolio, based on strong fundamentals and encouraging long-term prospects.
With the focus on opportunistic acquisitions, and growing deposit and loan balances, People's United Financial, Inc. (PBCT - Free Report) appears a promising buying opportunity now. In addition, the recent interest-rate hikes are anticipated to further stabilize the top line.
Though increasing risks remain a concern for People's United, management is taking steps to keep a check on expense growth. This, in turn, is anticipated to make the growth path smoother.
Therefore, it’s a good idea to add stocks with robust fundamentals and long-term growth opportunities to your portfolio, at the current level.
Additionally, this Zacks Rank #2 (Buy) stock has gained 15.7% in six months’ time compared with 12.8% growth recorded by the industry.
Why is People's United a Must Buy
Benefit from Rate Hike: With a rise in rates, banks are likely to engage in more investment activities. This rate hike will also enable banks to lend at higher rates. As People's United currently derives around 74% of its revenues from net interest income, the company is poised to benefit from recent rate hikes.
Revenue Growth: Organic growth is a key driver for People’s United, with sales witnessing a compound annual growth rate (CAGR) of 3% over the four-year period (2013-2016), with the increasing trend continuing in the first nine months of 2017. Moreover, growth in loans and deposits indicates a strong business trend for the bank.
The company’s projected sales growth (F1/F0) of 13.39% (as against the nil industry average) indicates continued improvement in revenues.
Strategic Moves: People’s United continues to benefit from a healthy business portfolio which has grown inorganically over time. In July 2017, it acquired LEAF Commercial Capital — an independent commercial equipment finance provider. In April 2017, the company completed the $391-million all-stock deal to acquire Riverhead-based Suffolk Bancorp, which is set to fortify its footprint in the New York Metro region. In line with its strategy to boost fee income businesses, the company completed the acquisition of Gerstein Fisher, a $3-billion New York-based investment management firm, last year. The company remains focused on opportunistic acquisitions that support its long-term growth profile.
Earnings Strength: People's United has recorded earnings growth rate of 5.7% over the last three to five years. Retaining the earnings momentum, the earnings growth rate is anticipated to be around 1% for the current year and 19% for 2018. Further, the company recorded an average positive earnings surprise of 2.09% over the trailing four quarters.
Steady Capital Deployment Activities: People's United remains focused on managing capital levels efficiently. In April 2017, the company raised its quarterly dividend by 1.5% to 17.25 cents per share, marking the 24th consecutive annual dividend hike.
Federated Investors, Inc. (FII - Free Report) has been witnessing upward estimate revisions for the past 30 days. In a year’s time, the company’s share price has been up more than 19%. It sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enterprise Financial Services Corporation (EFSC - Free Report) has been witnessing upward estimate revisions for the last two months. Additionally, the stock jumped more than 14% over the past year. It currently carries a Zacks Rank of 2.
First Financial Bancorp (FFBC - Free Report) has been witnessing upward estimate revisions for the past month. Also, the company’s shares have risen nearly 3% in a year’s time. It also holds a Zacks Rank of 2, at present.
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