On Mar 25, Zacks Investment Research upgraded Associated Banc-Corp ASB to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell).
Why the Upgrade?
Associated Banc-Corp exhibits fundamental strength, which will likely form the base for sustainable long-term growth. We expect the Wisconsin-based bank to grow 13.5% in 2015, outpacing the industry average of 11.3%.
Notably, Associated Banc-Corp has delivered positive surprises in three of the trailing four quarters, with an average earnings beat of 3.67%. Additionally, the company surpassed the Zacks Consensus Estimate by 3.3% in the fourth quarter of 2014.
The stock’s performance reflects a rising trend in net interest income, which contributed roughly 70% to the net revenue. Over the past 3 years (2012–2014), this revenue source has grown at a CAGR of 4.3%. As a result, total revenue witnessed a CAGR of 3.4% over the same time frame, enhancing the company’s organic growth prospects.
At the same time, Associated Banc-Corp is well poised to grow through inorganic routes, backed by healthy capital levels and robust liquidity. In Feb 2015, the company completed the acquisition of the Minnesota-based risk and benefits consulting firm, Ahmann & Martin Co. The deal is expected to be accretive to earnings in 2017.
Moreover, while loans and deposit balances continue to display strength; asset quality, too, has shown commendable improvement.
However, a persistent low-rate environment has taken toll on Associated Banc-Corp’s net interest margins, which fell 22 basis points over a span of 3 years to 3.08% in 2014. Also, mounting expenses and high concentration of commercial loans in the company’s loan portfolio continue to challenge its financials.
Over the past 30 days, the Zacks Consensus Estimate for the stock remained stable at $1.22 for 2015; while for 2016, it declined modestly to $1.39 from $1.41.
Key Picks from the Sector
Better-ranked stocks in the finance sector include Bank of the Ozarks, Inc. OZRK, Pinnacle Financial Partners Inc. PNFP and Southern First Bancshares, Inc. SFST. All these stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment