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.
Huntington Bancshares Incorporated (HBAN - 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 around 5% over the past six months compared with 8% growth recorded by the industry.
Notably, Huntington has a number of other aspects that make it an attractive investment option.
6 Reasons Why Huntington is an Attractive Pick
Revenue Strength: Huntington’s top-line growth remains a key strength at Huntington. Over a three-year period (ended 2017), net revenues have witnessed a compounded annual growth rate (CAGR) of 20.1%. Management expects total revenues for full-year 2018 to be up 5-6% year over year.
Further, the company’s projected sales growth of 5.3% for 2018 and 5.5% for 2019 ensures continuation of the upward revenue trend.
Earnings Strength: Huntington has witnessed earnings growth of 8.1% in the last three-five years. In addition, the company’s long-term (three-five years) estimated EPS growth rate of 14.6% 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 39.1%. Furthermore, Huntington recorded an average positive earnings surprise of about 0.9%, over the trailing four quarters.
Impressive Balance Sheet Growth: The company’s average loans and deposits have witnessed a CAGR of 13% and 14.2%, respectively, over a four-year period (ended 2017). Moreover, management predicts average loans and leases to increase in the 5.5-6.5% band on an annual basis, while average deposits are expected to be up 3.5-4.5%. Also, both loan and deposit balances are likely to get support from an improving economy.
Inorganic Growth Routes: Backed by its robust liquidity position, Huntington is poised to grow on acquisitions. In the past few years, the company has expanded its footprint with a number of acquisitions. In 2015, Huntington also announced the opening of additional 43 in-store Meijer branches in Michigan. It continues to position itself for growth and implement strategic initiatives designed to drive its top line.
Superior Return on Equity (ROE): Huntington’s ROE of 12.93%, compared with the industry average of 10.18%, highlights the company’s commendable position over its peers.
Stock Looks Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Other Stocks to Consider
Texas Capital Bancshares, Inc. (TCBI - Free Report) has been witnessing upward estimate revisions for the past 60 days. Also, the company’s shares have gained nearly 2.2%, 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.
BOK Financial Corporation (BOKF - Free Report) has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has jumped around 18.1% over the past year. It currently carries a Zacks Rank #2.
First Financial Bankshares, Inc. (FFIN - Free Report) has been witnessing upward estimate revisions for the past 90 days. Moreover, this Zacks #2 Ranked stock has rallied more than 36% in a year’s time.
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