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5 Reasons to Add People's United (PBCT) to Your Portfolio

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Favorable economic data, recent Fed interest rate hikes and tax-reform bill benefits have boosted investors’ confidence in banking stocks. Therefore, some of these stocks are likely to be profitable additions to your portfolio backed by strong fundamentals and encouraging long-term prospects.

With focus on opportunistic acquisitions, and growing deposit and loan balances, People's United Financial, Inc. appears a promising investment option now. In addition, the recent interest-rate hikes are anticipated to further stabilize the top line.

Though increasing costs remain a concern for People's United, management is taking steps to keep a check on expenses. This, in turn, is anticipated to make the growth path smoother.

Additionally, this Zacks Rank #2 (Buy) stock has gained 4% in six months’ time compared with nearly 1% growth recorded by the industry.



Why People's United is an Attractive Pick

Benefits From Rate Hikes: With a rise in rates, banks are likely to engage in more investment activities. The rate hikes 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 the recent hikes.

Revenue Growth: Organic growth is a key driver for People’s United, with sales witnessing a compound annual growth rate of 6.2% over the four-year period (2014-2017). Moreover, growth in loans and deposits indicates a strong business trend for the bank.

The company’s projected sales growth (F1/F0) of 11.66% (against 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, in 2016. The company remains focused on opportunistic acquisitions that support its long-term growth profile.

Earnings Strength: People's United has recorded an earnings growth rate of 5.98% over the last three to five years. Retaining the earnings momentum, the earnings growth rate is anticipated to be around 32% for the current year and 7.1% for 2019. Further, the company recorded an average positive earnings surprise of 4.87% in 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.

Other Stocks to Consider

Hancock Holding Company has been witnessing upward estimate revisions for the past seven days. In a year’s time, the company’s share price has increased more than 17%. It carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Community Trust Bancorp, Inc. (CTBI - Free Report) has been witnessing upward estimate revisions for the last two months. Additionally, the stock has jumped more than 3% 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 two months. Also, the company’s shares have rallied nearly 4.6% in six months’ time. It also holds a Zacks Rank of 2.

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