German American Bancorp (GABC - Free Report) has grown organically and inorganically over the years on the back of its strong capital position. Improving credit quality is another positive factor. Further, the company’s earnings growth prospects are impressive.
German American’s shares have gained 7.6% over the past six months, outperforming the industry’s rally of 3.4%.
Also, the Zacks Consensus Estimate for the company’s current-year earnings has been revised slightly upward over the past 60 days. Currently, the stock carries a Zacks Rank #2 (Buy).
Earnings Strength: German American has recorded an earnings growth rate of 5.5% over the last three to five years. This earnings momentum is likely to continue in the near term as reflected by the company’s projected earnings per share (EPS) growth rate of 25.2% and 15.6% for 2018 and 2019, respectively.
Solid Inorganic Growth Strategies: German American’s capital strength has been helping it to grow inorganically. As part of this strategy, the company announced the acquisition of First Security and its subsidiary, First Security Bank, in May 2018. The deal is expected to be accretive to the company's EPS during the 12 months following completion of the transaction (likely in fourth-quarter 2018).
Revenue Growth: The company continues to make steady progress toward improving its top line. Its revenues recorded a five-year (ended 2017) CAGR of around 9.4%. Further, its projected revenue growth (F1/F0) of 13% (against the industry average of about nearly 8.1%) indicates consistent upward momentum in revenues.
Impressive Balance Sheet Growth: The company’s loans and deposits have witnessed a CAGR of 11.6% and 8.2%, respectively, over a five-year period (ended 2017). Thus, strong balance sheet position enables German American to undertake any opportunistic expansion moves.
Steady Capital Deployment Activities: German American remains committed to enhancing shareholder value. It has been increasing its common stock dividend every year since 2013, with the latest hike of 15% announced in January 2018.
Improved Credit Quality: German American’s credit quality has improved significantly as reflected by ratio of net charge-offs to average loans declining to 0.04% in 2017 from 0.10% in 2013. Similarly, allowance for loan losses to loans fell to 0.73% from 1.05%, during the same time period.
Superior Return on Equity (ROE): With a ROE of 11.07% compared with the industry average of 10.18%, the company appears to reinvest its cash more efficiently.
Other Stocks to Consider
The Zacks Consensus Estimate for Wintrust Financial Corporation’s (WTFC - Free Report) earnings for 2018 has been revised 2.9% upward in the past 60 days. Also, its share price has increased 27.6% in the past 12 months. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Commerce Bancshares, Inc. (CBSH - Free Report) currently carries a Zacks Rank #2. The stock’s 2018 earnings estimates have been revised 1.8% upward in the past 60 days. Further, the company’s shares have gained 38.7% in a year’s time.
The Zacks Consensus Estimate for Lakeland Financial Corporation’s (LKFN - Free Report) earnings for the current year has been revised 2% upward over the past 60 days. Moreover, in the past year, its shares have gained 13%. Also, it carries a Zacks Rank of 2.
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