On Jun 20, 2014, we issued an updated research report on Washington Federal Inc. (WAFD). Although the company reported in-line second-quarter fiscal 2014 results, mounting non-interest expenses make us apprehensive.
Persistent increase in operating expenses poses as a major challenge to bottom-line growth at Washington Federal. For the last several years, expenses have been on the rise, with the trend continuing in the first half of fiscal 2014 as well. Given the recent branch acquisitions and continued investments in franchise, we believe that expenses will keep mounting in the quarters to follow.
Moreover, we remain concerned about Washington Federal’s exposure to risky loan portfolios including land acquisition & development, speculative constructions and commercial real estate. Though the company has lately been reducing such exposure, we do not anticipate significant improvement in the near term.
Further, over the past 60 days, the Zacks Consensus Estimate for fiscal 2014 and fiscal 2015 has remained unchanged. For fiscal 2014, the Zacks Consensus Estimate is pegged at $1.51 per share, while it stands at $1.62 per share for fiscal 2015.
Washington Federal currently has a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
Some better-ranked banking stocks include Anchor Bancorp (ANCB), West Bancorp., Inc. (WTBA) and Great Southern Bancorp Inc. (GSBC). All these stocks sport a Zacks Rank #1 (Strong Buy).
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