Commerce Bancshares’ CBSH impressive revenue growth and growing deposit and loan balances make it a promising pick right now. Moreover, a strong capital position supports its capital deployment activities.
A positive trend in estimate revisions also reflects optimism on the company’s earnings growth prospects. The Zacks Consensus Estimate for Commerce Bancshares’ 2017 earnings has remained stable over the last seven days. Further, earnings estimates for 2018 have witnessed a rise of 1.4%. As a result, the stock currently carries a Zacks Rank #2 (Buy).
The stock has gained 3.5% over the past six months, underperforming the industry’s rally of 6.5%. However, given the strong fundamentals, we expect the stock to outperform the market in 2018.
Why Commerce Bancshares is a Good Bet
Revenue Growth: Organic growth remains a key strength at Commerce Bancshares as reflected by its revenue growth story. Revenues witnessed a CAGR of 4.5% over the last three years (2014-2016), with the trend continuing in 2017. Moreover, a consistent improvement in non-interest income along with impressive loan and deposit balances indicate chances of robust revenue generation, going forward. Also, the company’s sales are projected to grow 4.6% in 2018.
Earnings per Share Strength: Commerce Bancshares’ earnings growth rate for 2018 is anticipated to be 7.2%. The long-term (three-five years) expected EPS growth of 6.2% promises rewards for its shareholders. Moreover, the company has an impressive earnings surprise history, outpacing the Zacks Consensus Estimate in three of the trailing four quarters. It delivered an average positive surprise of 2% for this period.
Steady Capital Deployment: Commerce Bancshares has impressive capital deployment activities. The company has been consistently paying a 5% stock dividend for more than a decade now (the latest one was announced in October 2017). Apart from this, the company pays regular quarterly cash dividends and has a share repurchase program in place. This underlines the company’s commitment to return value to shareholders.
Strong Leverage: Commerce Bancshares’ debt/equity ratio is valued at 0.04 compared with the industry’s average of 0.45, thus displaying lower debt burden relative to the industry. This, in turn, reflects the company’s relatively strong financial health, which will help it perform better than its peers under a dynamic business environment.
Superior Return on Equity (ROE): Commerce Bancshares’ ROE of 12.01% compared with the industry average of 9.42% reflects the company’s commendable position over its peers.
Other Stocks to Consider
Some other top-ranked stocks from the same space are Enterprise Financial Services Corp EFSC, Civista Bancshares CIVB and MainSource Financial Group MSFG, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enterprise Financial witnessed an upward earnings estimate revision of 4% for 2018 in the last 30 days. Its share price has increased 12.2% in the past 12 months.
Civista Bancshares’ Zacks Consensus Estimate has been revised 6.6% upward for 2018 earnings in the last 30 days. The company’s share price has increased 9.1% in the past 12 months.
MainSource Financial witnessed upward earnings estimate revision of 12.5% for 2018 in the last 30 days. Its share price has increased 12.3% in the past 12 months.
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