HSBC Holdings plc (HSBC - Free Report) is on track to improve market share in the U.K. and China as well as strengthen digital capabilities globally. While these efforts are expected to increase its exposure in the emerging markets, these are also likely to lead to higher expenses.
In fact, the company’s Zacks Consensus Estimate for current-year earnings has been revised only marginally upward over the past 30 days. Thus, the stock currently carries a Zacks Rank #3 (Hold).
Its price performance is also not very impressive. The company’s shares have lost 13.4% over the past year compared with 14.5% decline of the industry it belongs to.
Looking at its fundamentals, the company’s revenue generation has remained muted over the past several quarters. Moreover, global economic concerns and low interest rate environment continue to weigh on its top-line growth.
While HSBC’s efforts to focus on profitable markets and enhance operating efficiency by divesting/closing non-core businesses led to a decline in costs in 2016 and 2017, expenses increased during the first nine months of 2018. Moreover, as the company now intends to focus on growing market share in the U.K. and China, as well as strengthen its digital capabilities globally, operating expenses are likely to increase further.
Further, regulatory probes and litigations related to past business malpractices continue to adversely impact HSBC’s financials. Further, stringent regulations will likely keep the company’s financials under pressure.
Despite the uncertain macro-environment, the company remains strong, with respect to its balance sheet and capital position. Based on a lower debt-equity ratio compared with the industry, HSBC has been consistently rewarding shareholders. Further, it plans to keep the dividend payout ratio of 40-60% intact for “the foreseeable future”. So, such steady capital deployment plans will surely boost investors’ confidence in the stock.
Moreover, its brand, capital strength, extensive global network and positioning enable it to continuously attract, and retain clients. Further, the company’s product and service leadership in alternative investments, foreign exchange, credit, investment advice and many other cross-border banking services help it in widening the customer base.
A few better-ranked stocks from the finance space are mentioned below.
Credit Acceptance Corporation’s (CACC - Free Report) Zacks Consensus Estimate for the current year has increased 1% over the past 60 days. Its share price has increased 42.2% over the past year. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
U.S. Bancorp (USB - Free Report) currently carries a Zacks Rank #2 (Buy). The stock has witnessed a marginal upward earnings estimate revision for the current year over the past 60 days. In the past year, shares of the company have gained 2.2%.
Ares Capital Corporation’s (ARCC - Free Report) Zacks Consensus Estimate for the current year has been revised 2.5% upward over the past 60 days. Its shares gained 4.2% in the last 12 months. Currently, it also carries a Zacks Rank #2.
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