On Dec 26, 2014, we issued an updated research report on Cullen/Frost Bankers, Inc. (CFR). This commercial and consumer banking services provider has recorded positive earnings surprises in three of the last four quarters with an average surprise of 2.55%.
We believe this growth story has been aided by the company’s continued focus on organic growth among several other positives including a strong capital position, steady capital deployment activities and strategic acquisitions.
Organic growth remains a key strength at Cullen/Frost, as reflected in its revenues. Revenues grew at a CAGR of 2.7% over the last five years (2009–2013). Moreover, net revenues increased 8.7% year over year in first nine months of 2014. We believe the company is well positioned to maintain this trend going forward.
As of Sep 30, 2014, deposits grew 13.5% over the last nine months, while loans were up 12.9%. Therefore, the growing deposit base would help the company generate more loans and meet other general business purposes. Additionally, backed by its strong liquidity position, Cullen/Frost has been consistently paying dividends.
Cullen/Frost continues to expand through acquisitions. In May 2014, in an attempt to increase its footprint in Texas, the company completed the merger with WNB Bancshares, Inc. This marks the first bank acquisition for Cullen/Frost since 2006 when it bought Fort Worth-based Summit Bancshares Inc. The merger enabled Cullen/Frost to reinforce its Texas franchise and enter the profitable Midland and Odessa markets.
However, with the growing level of non-interest expenses, the company is exposed to operational risks. Non-interest expenses grew 6.2% year over year for the nine months ended Sep 30, 2014. Continuation of this trend will remain a hindrance for bottom-line growth.
For 2014, the Zacks Consensus Estimate advanced around 1% to $4.30 per share over the past 60 days. It moved up by a penny to $4.56 per share for 2015. Currently, Cullen/Frost carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some finance stocks worth considering include Customers Bancorp, Inc. (CUBI) and Middleburg Financial Corporation (MBRG), with a Zacks Rank #1 (Strong Buy), while BOK Financial Corporation (BOKF) carries a Zacks Rank #2 (Buy).
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