Cullen/Frost Bankers (CFR - Free Report) appears to be a promising buying option now on the back of its sound organic growth strategies. Further, improving earnings performance and a strong capital and liquidity profile are likely to support profitability. Further, the recent interest rate hike is anticipated to support the top line.
Analysts’ optimism about the company’s prospects is reflected in the upward estimate revision. Over the past 60 days, the Zacks Consensus Estimate for fourth-quarter 2018 and full-year 2018 moved up slightly.
Shares of this Zacks Rank #2 (Buy) company have gained around 1% over the past two years against 19.5% decline recorded by the industry.
Notably, Cullen/Frost has a number of other aspects, which make it an attractive investment option.
Why Cullen/Frost is an Attractive Buy
Revenue Growth: Organic growth is a key strength for Cullen/Frost, as reflected by its revenue growth story. Revenues witnessed a CAGR of 8% over the last five years, (2013-2017), with the trend continuing in the first three quarters of 2018 as well. The momentum is expected to continue in the quarters ahead.
Earnings Per Share Strength: Cullen/Frost witnessed earnings growth of 10.11% over the past three-five years. In addition, the company’s long-term (three-five years) estimated EPS growth rate of 9.5% promises rewards for investors. Also, it has a four-quarter average positive earnings surprise of 5.09%.
Strong Leverage: Cullen/Frost’s debt/equity ratio is valued at 0.07 compared with the industry’s average of 0.44, displaying lower debt burden relative to the industry. It highlights the financial stability of the company even in an unstable economic environment.
Steady Capital Deployment: Cullen/Frost manages its capital levels efficiently. In April 2018, the company hiked its quarterly stock dividend by 17.5%. Notably, it raised dividends annually for 25 consecutive years. Also, in 2017, its board of directors approved a $150-million common stock-repurchase program. This underlines the company’s commitment to return value to shareholders.
Superior Return on Equity (ROE): Cullen/Frost’s ROE of 12.74% compared with the industry average of 10.27%, reflects the company’s commendable position over its peers.
Stock is Undervalued: The stock’s P/E and P/CF ratios are 12.85 and 11.21 compared with the industry average of 13.20 and 13.16, respectively. Also, the stock has a Value Score of B. Based on these ratios, the stock seems undervalued. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Stocks to Consider
Bank of Marin Bancorp (BMRC - Free Report) has witnessed slight upward estimate revisions for 2018 for the past 60 days. Additionally, the stock has jumped more than 20% in the past year. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Old Second Bancorp, Inc. (OSBC - Free Report) has witnessed stable estimates for 2018 over the past 60 days. Also, the company’s shares have risen nearly 19.2% over the past two years. It holds a Zacks Rank of 2, at present.
First Financial Bankshares, Inc. (FFIN - Free Report) has witnessed stable estimates for 2018 for the past 60 days. In a year’s time, this Zacks #2 Ranked company’s share price has been up more than 25%.
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