For Immediate Release
Chicago, IL –October 16, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: FS Bancorp, Inc. (FSBW - Free Report) , First Financial Northwest, Inc. (FFNW - Free Report) , BancorpSouth Bank (BXS - Free Report) , M&T Bank Corp. (MTB - Free Report) and PacWest Bancorp (PACW - Free Report) .
Here are highlights from Tuesday’s Analyst Blog:
5 Bank Stocks to Win Big Ahead of Q3 Earnings
U.S. banks are anticipated to see a feeble start to the earnings season this week. And it’s solely because of declining interest rates, which may have had a negative impact on net interest margins. Needless to say, a banks’ profit margin heavily depends on its net interest income or the difference between the rates they charge as long-term loans and the rate they pay for short-term borrowings.
For third-quarter earnings, the Major Banks industry, including JPMorgan and Wells Fargo, is expected to see an earnings decline of 9.4% from the same period last year despite 0.3% higher revenues (read more: What to Expect from Q3 Earnings Season with Big Banks Set to Report?).
Part of the problem is Fed’s move to trim interest rates in July and September. The Fed cut target interest rate by 25 bps to a range of 1.75-2% last month to lend support to an economy which was grappling with trade tensions and other heightened geopolitical issues. Decline in business investments as well as exports coupled with persistently-low levels of inflation were cited as reasons behind the rate cuts.
Lest we forget, in July, Fed officials voted to trim rates by a quarter percentage point to a range between 2% and 2.25%. Fed Chair Jerome Powell had said that rate cuts were primarily due to two reasons. Firstly, as Powell categorically puts it, trade-related matters remain unresolved, and secondly, concerns about global economic growth continue to weigh on the U.S. economy.
Big banks, in particular Citigroup, have already given hints that interest rate cuts will adversely impact their net interest income. Citigroup stated that an interest rate cut by 25 basis points would affect its quarterly revenues by $50 million. What’s more disturbing for banks was that President Trump wanted the Fed to slash rates more aggressively, thanks to record-low unemployment levels.
Nonetheless, things are not all gloomy for banks. Strength in mortgage banking might provide some respite. Refinancing, which accounts for most of mortgage applications, has more than doubled from a year ago, per Mortgage Bankers Association data. And Manulife Investment Management’s Lisa Welch, who manages the John Hancock Regional Bank Fund, said that “with rates being lower, we think mortgage activity will be very strong.”
Banks’ valuations, by the way, also look attractive. The index’s trading multiple of 10.2 times earnings estimate for the next 12 months compares well to the broader S&P 500’s recent trading multiple of 16.4.
5 Bank Stocks to Gain Heading Into Q3 Earnings
The aforesaid factors will surely help some banks stay afloat this earnings season. This calls for investing in such banks, which are expected to report a significant uptick in third-quarter earnings. These stocks flaunt a positive Earnings ESP — our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
FS Bancorp, Inc. operates as a bank holding company for 1st Security Bank of Washington that provides banking and financial services to local families, local and regional businesses, and industry niches. The company is expected to report earnings results for the quarter ending September 2019 on Oct 24. FS Bancorp has an Earnings ESP of +1.37%. The company’s expected earnings growth rate for the current quarter and year are 25.9% and 6%, respectively. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
First Financial Northwest, Inc. operates as the holding company for First Financial Northwest Bank that provides commercial banking services in Washington. The company is expected to report earnings results for the quarter ending September 2019 on Oct 24. First Financial Northwest has an Earnings ESP of +4.55%. The company’s expected earnings growth rate for the next quarter is 9.5%. The stock has a Zacks Rank #3 (Hold).
BancorpSouth Bankprovides commercial banking and financial services to individuals and small-to-medium size businesses. The company is expected to report earnings results for the quarter ending September 2019 on Oct 21. BancorpSouth has an Earnings ESP of +2.61%. The company’s expected earnings growth rate for the current quarter and year are 8.9% and 2.7%, respectively. The stock has a Zacks Rank #3.
M&T Bank Corp.operates as the holding company for Manufacturers and Traders Trust Company; and Wilmington Trust, National Association that provide banking services. The company is expected to report earnings results for the quarter ending September 2019 on Oct 17. M&T Bank has an Earnings ESP of +0.34%. The company’s expected earnings growth rate for the current quarter and year are 1.4% and 7.7%, respectively. The stock has a Zacks Rank #3.
PacWest Bancorpprovides commercial banking products and services. The company is expected to report earnings results for the quarter ending September 2019 on Oct 15. PacWest Bancorp has an Earnings ESP of +1.53%. The company’s expected earnings growth rate for the current year is 3.5%. The stock has a Zacks Rank #3.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.