The Fed rate hike in Dec 2016, along with the Trump effect, has led banking stocks to rally. People's United Financial, Inc. PBCT is one such stock. Though the company has recorded escalating expenses and faces strict regulations, it has been growing through acquisitions.
Opportunistic acquisitions and strong loans, and deposits balances aided the company in surging 22.8% compared with the 27.7% growth for the Zacks categorized Savings & Loan industry.
Further, the company’s earnings estimates have inched up 1.1% to 92 cents for 2016, for the last 60 days. As a result, it carries a Zacks Rank #2 (Buy).
In line with its strategy to boost fee income businesses, the company completed the acquisition of Gerstein Fisher, a $3-billion, New York-based investment management firm, in Nov 2016. Previously, in Jun 2016, it had inked a $391-million all-stock deal to acquire Riverhead-based Suffolk Bancorp, which would fortify its footprint in the New York metro region. Both the transactions are expected to be accretive to earnings.
Further, driven by a robust capital position, the company remains committed to enhance shareholders’ value. In Apr 2016, it raised its quarterly dividend to 17 cents per share, marking the 23rd consecutive annual dividend hike. Notably, in the latest earnings conference call, management highlighted that the company will not cross the $50-billion assets threshold, without regulatory support for dividend. It also stated that it will continue to work toward lowering its dividend payout ratio through an improvement in earnings.
Additionally, over the past few years, People's United has been witnessing rising loans and deposits. The growth momentum is likely to continue, driven by consistent economic recovery. Management noted that historically, fourth-quarter 2016 has been the strongest quarter, in terms of loan origination with pipelines; ending the quarter at sturdy levels. The company anticipates this trend to continue, going ahead.
Stocks to Consider
Other stocks in the finance space worth considering include The Goldman Sachs Group, Inc. GS, Zions Bancorporation ZION and Comerica Incorporated CMA.
Goldman has witnessed an upward earnings estimate revision of 2.1% for 2016, for the past 30 days. Its share price has risen 35.2% over the last one-year period. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Comerica also boasts a Zacks Rank #1. Its Zacks Consensus Estimate for 2016 moved slightly upward, over the last 30 days. Its share price has surged 64.4% over the last one-year period.
Zions carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 3.8% for 2016, over the past 90 days. Over the last one-year period, its share price is up 61.1%.
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