It seems to be a wise decision to add SunTrust Banks, Inc. (STI - Free Report) stock to your portfolio now, given the company’s efforts to improve efficiency and enhance revenue growth through several initiatives. Also, its organic growth, aided by rising loans, as well as higher interest rates, bode well for the future.
Also, SunTrust’s encouraging capital-deployment activities reflect a strong balance sheet position. Further, the company has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in all the trailing four quarters.
The company’s Zacks Consensus Estimate for 2019 earnings has remained unrevised over the last 60 days. The stock currently sports a Zacks Rank #2 (Buy).
In the past year, the stock has lost around 21.2% compared with the 18.7% decline of the industry.
With $211.3 billion in assets as of Sep 30, 2018, SunTrust has a number of other aspects that make it an attractive investment option.
5 Reasons Why SunTrust is a Must Buy
Earnings Strength: SunTrust witnessed historical (3-5 years) earnings per share growth of 11.1% compared with 9% growth recorded by the industry. In addition, the company’s estimated long-term EPS growth rate of 10.82% promises rewards for investors. Further, the company recorded a positive earnings surprise of 9.39% in the trailing four quarters.
Revenue Growth: SunTrust’s revenues have been supported by rising rate environment. Net interest margin (NIM) improved from 2.91% in 2015 to 3.00% in 2016 and further to 3.14% in 2017. Net interest income (NII) witnessed a four-year CAGR of 5.2% (2014-2017). Both NIM and NII witnessed uptrend in the first nine months of 2018 as well. Further, the rise in loan demand is expected to support top-line growth in the future. Revenues are expected to increase 3.7% in 2019.
Effective Expense Management: SunTrust’s cost-saving initiatives yielded results, with non-interest expenses declining at a six-year (2012-2017) CAGR of 1.7%, mainly driven by branch consolidation efforts. However, expenses flared up in 2017 and in 2016 (in sync with its plan to enhance revenue growth).
Leverage: SunTrust’s debt/equity ratio is pegged at 0.65 against the industry average of 0.94, reflecting lower debt burden compared with the industry. It highlights the company’s sound financial flexibility.
Stock Looks Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score which 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 (Buy), offer the best upside potential.
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