We have issued an updated research report on BB&T Corporation BBT, a NC-based diversified financial holding company, on Thursday, Dec 17, 2015. The company’s shares have declined 2.7% year to date, and recent earnings estimate revisions suggest that the stock is unlikely to perform well in the near term.
Notably, over the past 60 days, 2 estimates for the stock have been revised lower for 2015, while 4 have gone down for 2016. As such, the Zacks Consensus Estimate has declined 1.5% to $2.62 per share and 0.1% to $3.11 per share, for 2015 and 2016, respectively.
We believe these negative revisions are primarily led by management’s outlook of flat loan growth in the fourth quarter of 2015; wherein a modest rise in C&I loan portfolio will likely be offset by declines in sales finance as well as residential loan portfolios. This, in turn, is anticipated to weigh on the company’s net interest income, which constitutes nearly 60% of total revenue.
Further, while the company expects notable cost and revenue synergies from the recent and pending acquisitions, merger-related costs will likely keep expenses high in the upcoming quarters. As such, elevated expenses and decline in revenues are predicted to act as near-term headwinds for BB&T.
Nonetheless, recent increase in benchmark interest rates will likely offset the pressure on the bank’s net interest margins, and subsequently, its top line, to a certain extent. Moreover, projected improvement in non-interest revenues led by higher insurance income and investment banking income is anticipated to support revenues, partially offset by soft growth in mortgage-banking markets.
BB&T currently holds a Zacks Rank #4 (Sell).
Key Picks from the Sector
Better-ranked stocks for investors interested in the finance space include Bank of the Ozarks, Inc. OZRK and National Bank Holdings Corp. NBHC, both sporting a Zacks Rank #1 (Strong Buy); and The PNC Financial Services Group, Inc. PNC, carrying a Zacks Rank #2 (Buy).
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