In the Q2 earnings season, the Finance sector turned out to be one of the best performers. Particularly, benefits from a stabilizing economy and improving interest-rate scenario have well positioned the banking industry. Moreover, lower commercial tax rate are likely to boost banks’ profitability further.
In addition, relieving banks from some of the stringent requirements of the Dodd-Frank Act has made the companies optimistic of future earnings growth and raised investors’ sentiments as well. So, we thought of picking a stock from the sector that reflects strong fundamentals and has solid long-term growth opportunities.
U.S. Bancorp (USB - Free Report) is one such stock that not only beat estimates this season, but has also been witnessing upward estimate revisions, reflecting analysts’ optimism about its future prospects. Over the last 60 days, the Zacks Consensus Estimate for 2018 and 2019 moved up slightly.
Additionally, this Zacks Rank #2 (Buy) stock has rallied 2.5% over the past six months as against the 3.8% decline recorded by the industry.
Notably, U.S. Bancorp has a number of other aspects that make it an attractive investment option.
5 Reasons Why U.S. Bancorp is an Attractive Pick
Revenue Strength: U.S. Bancorp’s net total revenues have witnessed a compounded annual growth rate (“CAGR”) of 3%, over the last five years (2013-2017). The sturdy top-line growth has been driven by higher net interest and non-interest income.
Further, the company’s projected sales growth of 2.9% for 2018 and 4.4% for 2019 ensures continuation of the upward revenue trend.
Earnings Strength: U.S. Bancorp has witnessed earnings growth of 3.8% in the last three-five years. In addition, the company’s long-term (three-five years) estimated EPS growth rate of 7.5% promises rewards for investors over the long run.
Earnings are anticipated to display an upswing in the near term, as the company’s projected EPS growth (F1/F0) is 19%. Further, U.S. Bancorp recorded an average positive earnings surprise of 0.8%, over the trailing four quarters.
Inorganic Growth Routes: U.S. Bancorp has made a number of strategic bank acquisitions in the past years, which have opened up new markets for the company and fortified its existing ones. These acquisitions, combined with the ongoing investments in innovative product enhancements, services and people, have strengthened the company’s balance sheet and fee-based businesses besides increasing market share.
Superior Return on Equity (ROE): U.S. Bancorp’s ROE of 14.66%, compared with the industry average of 11.6%, highlights the company’s commendable position over its peers.
Strong Leverage: The debt-to-equity ratio for U.S. Bancorp is 0.83 compared with the industry average of 0.92. This indicates greater financial stability for the company and lesser risks for shareholders.
Other Stocks to Consider
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the past 60 days. Also, the company’s shares have gained nearly 29.1%, in the past year. It carries a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the past 90 days. Additionally, the stock has jumped around 11.1% over the past year. It currently carries a Zacks Rank #2.
Enterprise Financial Services Corporation (EFSC - Free Report) has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #2 Ranked stock has rallied more than 32% in a year’s time.
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