We upgraded our long-term recommendation on Washington Federal Inc. (WAFD) to Outperform from Neutral based on its efficient capital deployment activities.
Rationale behind the Upgrade
Washington Federal’s fiscal fourth-quarter 2013 earnings (ended Sep 30) came in at 41 cents, beating the Zacks Consensus Estimate by a nickel. The reported figure also compared favorably with 33 cents earned in the year-ago quarter. The company has delivered positive earnings surprises in the past four quarters with an average beat of 7.3%.
Over the last 60 days, the Zacks Consensus Estimate for fiscal 2014 has gone up 1.9% to $1.59 per share. Moreover, the Zacks Consensus Estimate for fiscal 2015 rose nearly 1% to $1.66 per share over the same time frame. Hence, Washington Federal now has a Zacks Rank #1 (Strong Buy).
Washington Federal’s earnings streak, along with its consistent trend of returning capital to shareholders makes it an attractive pick for yield-seeking investors. In fiscal 2013, the company returned 98% of its net income to shareholders in the form of dividends and share buybacks.
Washington Federal continues to increase its market share through strategic acquisitions. Considering the strong capital and liquidity position, we believe that the company is well-poised to continue inorganic expansion.
Further, the company has witnessed a long-term uptrend for loans and deposits. With the market scenario improving and investors gaining confidence, demand for loans will continue to increase, going forward.
Other Stocks Worth Considering
Other financial organizations worth considering include Flagstar Bancorp Inc. (FBC), Great Southern Bancorp Inc. (GSBC) and Investors Bancorp Inc. (ISBC). All these stocks carry the same Zacks Rank as Washington Federal.
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