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Is it Wise to Add Old National Bancorp to Your Portfolio?

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Benefits from a stabilizing economy and improving interest-rate scenario have well positioned the banking industry. Moreover, lower commercial tax rates 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.

Old National Bancorp (ONB - Free Report) is one such stock that has been witnessing upward estimate revisions, reflecting analysts’ optimism about its future prospects. Over the last 90 days, the Zacks Consensus Estimate for 2018 and 2019 moved up 2.3% and 2.7%, respectively.

Additionally, this Zacks Rank #2 (Buy) stock has rallied around 16.6% over the past six months compared with 5.4% growth recorded by the industry.


Notably, Old National Bancorp has a number of other aspects that make it an attractive investment option.

4 Reasons Why Old National Bancorp is an Attractive Pick  

Inorganic growth strategy: Old National Bancorp has been growing through acquisitions, of late. In June 2018, the bank announced a deal to acquire Minnesota-based Klein Financial, Inc., for roughly $434 million. Upon its anticipated closure in fourth-quarter 2018, this transaction will be 6.2% accretive to the bank’s earnings in 2020.

Additionally, for the past several years, Old National Bancorp has been expanding inorganically. These efforts have supported the bank’s financials amid tough economic backdrop. With the strong balance-sheet position, the company will likely continue undertaking such opportunistic deals.

Earnings growth: Old National Bancorp witnessed a 2.1% rise in earnings per share in the last three to five years. This earnings momentum will likely continue in the near term, as reflected by the company’s projected earnings growth of 19.1% for 2018 and 14% for 2019.

Also, Old National Bancorp has a decent earnings surprise history. The bank delivered an average positive earnings surprise of 9% in the trailing four quarters. Furthermore, the company’s long-term (three-five years) estimated EPS growth rate of 8.0% promises rewards for investors for the long run.

Revenue strength: Old National Bancorp’ net revenues have witnessed a compounded annual growth rate of 6.5% over the last five years (2013-2017). This upside stemmed from stellar loan and deposit growth. Additionally, higher interest rates will continue supporting revenues.

The company’s projected sales growth rate of 15.5% and 13.3% for 2018 and 2019, respectively, ensures continuation of the upward revenue trend.

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

German American Bancorp, Inc. (GABC - Free Report) has been witnessing upward estimate revisions for the past 60 days. Also, the company’s shares have gained nearly 6.8%, in the past six months. 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.

First Financial Bankshares, Inc. (FFIN - Free Report) has been witnessing upward estimate revisions for the past 90 days. Additionally, the stock has jumped around 29.8% over the past six months. It currently carries a Zacks Rank #2.

First Financial Bancorp. (FFBC - Free Report) has been witnessing upward estimate revisions for the past 90 days. Moreover, this Zacks #2 Ranked stock has rallied more than 2% in six months’ time.

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