Back to top

Is it Advisable to Add People's United to Your Portfolio?

Read MoreHide Full Article

Favorable economic data, the Fed’s recent rate hikes, easing of regulations 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. (PBCT - Free Report) 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 ease growth path.

Additionally, this Zacks Rank #2 (Buy) stock 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 slightly.

However, the stock has lost around 8.6% in six months’ time compared with nearly 8.5% decline recorded by the industry.

Why People's United is a Golden Egg

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, it is poised to benefit from the recent hikes.

Revenue Growth: Organic growth is a key driver for People’s United, with its 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 10.58% (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. For the past few years, the company has maintained an acquisition spree fortifying its footprint in various areas. These transactions are anticipated to continue to be accretive to earnings. Given its solid liquidity position, 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 7.27% over the last three to five years. Retaining its earnings momentum, the earnings growth rate is anticipated to be around 32.99% for the current year and 10.52% for 2019. Further, the company recorded an average positive earnings surprise of 3.78% over the trailing four quarters.

Steady Capital Deployment Activities: People's United remains focused on efficiently managing its capital levels. In April 2018, the company raised its quarterly dividend by 1.4%, marking the 25th consecutive annual dividend hike.

Other Stocks to Consider

Greenhill & Co., Inc. (GHL - Free Report) has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #1 (Strong Buy) Ranked stock has rallied more than 39% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

E*TRADE Financial Corporation (ETFC - Free Report) has been witnessing upward estimate revisions for the past 30 days. Also, the company’s shares have gained nearly 5.7%, year to date. It carries a Zacks Rank of 2, at present.

First Financial Bankshares, Inc. (FFIN - Free Report) has been witnessing upward estimate revisions for the past 90 days. Additionally, the stock has jumped around 32.6% year to date. It currently carries a Zacks Rank #2.

5 Companies Verge on Apple-Like Run

Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2018 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs. A bonus Zacks Special Report names this breakthrough and the 5 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains.

Click to see them right now >>

More from Zacks Analyst Blog

You May Like

Published in