Regions Financial Corporation (RF - Free Report) remains well poised for the future, supported by its cost-control measures along with efforts to grow inorganically. However, muted growth in fee income and pending legal issues remain key concerns for the company.
Moreover, the company’s Zacks Consensus Estimate for current-year earnings has remained unchanged over the past 30 days, reflecting that analysts are not very optimistic regarding its earnings growth potential. Thus, the stock currently carries a Zacks Rank #3 (Hold).
Moreover, shares of the company have lost 1% over the past year compared with 6.8% decline recorded by the industry it belongs to.
Going by the fundamentals, while Regions Financial’s expenses increased at a CAGR of 1.9% over the past four years (2014-2017), the company remains on track to reduce expenses by $400 million by 2019. Further, its plans of consolidating about 30-40 branches in 2018 might help it reduce costs further.
In an effort to boost its diversified business, Regions Financial has been in an acquisition spree over the past few years. It continues to take actions with respect to its Simplify and Grow initiative — including streamlining its structure and refining its branch network while making investments in new technologies, delivery channels, and other growth drivers. As the company remains committed to diversify its revenue streams, we believe such acquisitions are likely to support its growth prospects.
Further, given a solid capital and balance sheet position, the company is expected to continue enhancing shareholder value through efficient capital-deployment activities.
However, the company’s fee income has been witnessing a volatile trend over the last few years mainly due to lower mortgage income and other income. Though it is undertaking initiatives to increase revenues, volatile trend in non-interest income is likely to weigh on its top line.
Further, Regions Financial is yet to solve some pending lawsuits from the investors and regulators for violation of rules, and forgery. This is likely to impact its financials in the near term.
Stocks to Consider
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 3.4% over the past 60 days. Its share price has increased significantly over the past two years. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Popular, Inc. (BPOP - Free Report) currently carries a Zacks Rank #2 (Buy). Over the past 60 days, the stock has witnessed an upward earnings estimate revision of 4.3% for the current year. In the past two years, shares of the company have gained 32.9%.
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 6.5% in the last 24 months. Currently, it carries a Zacks Rank #2.
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