On the back of its efforts to improve efficiency and enhance revenue growth through several initiatives, SunTrust Banks, Inc. STI appears a solid bet now. The company’s cost saving initiatives bode well for the future.
Also, SunTrust’s encouraging capital deployment activities reflect a strong balance sheet position. Further, the company has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in three of the trailing four quarters.
The company’s Zacks Consensus Estimate for 2017 earnings has been revised marginally upward over the last 30 days, indicating analysts’ optimism about its earnings growth potential. As a result, the stock currently sports a Zacks Rank #1 (Strong Buy).
Given the positive estimate revisions and a solid Zacks Rank, we expect a decent upside for the stock in the near term. Also, shares of SunTrust have rallied 19.7% over the past year, marginally outperforming the industry’s rise of 18.8%.
Why SunTrust is a Solid Pick?
Earnings per Share (ESP) Growth: SunTrust witnessed EPS growth of 3.4% in the last three to five years. Moreover, earnings are projected to grow at the rate of 14.5% and 10.2% in 2017 and 2018, respectively.
Further, the company’s long-term (three to five years) estimated EPS growth rate of 9.1% promises rewards for investors.
Revenue Strength: SunTrust’s revenues have witnessed a four-year (2013-2016) CAGR of 2.1%. Further, the rise in loan demand is expected to support top-line growth in the future. Revenues are expected to increase 5.5% in 2017 and 3.8% in 2018.
Effective Expense Management: SunTrust’s cost-saving initiatives yielded results, with non-interest expenses declining at a four-year (2013-2016) CAGR of 2.1%. The company remains undeterred in its efforts to enhance efficiency and targets an efficiency ratio below 60% by the end of 2019.
Strong Leverage: SunTrust’s debt/equity ratio is 0.50 compared with the industry average of 0.88, pointing to a relatively lower debt burden. This indicates the company’s financial stability even in adverse economic conditions.
Other Stocks to Consider
A few other stocks in the finance space worth a look are First Community Corp. FCCO, Synovus Financial Corp. SNV and Carolina Financial Corp. CARO. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for First Community Corporation has increased 7.6% for 2018, in the last 30 days. The company’s share price has increased 25.1% in the past year.
Synovus Financial witnessed a marginal upward earnings estimate revision for 2018, in the last 30 days. Its share price has risen 15% in the past year.
Carolina Financial’s shares have gained 20.4% in a year and its earnings estimates have remained stable for 2018, in the last 30 days.
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