On Dec 3, First Business Financial Services (FBIZ) touched a 52-week high of $38.38. The momentum was driven by the company’s solid third-quarter 2013 results and its efforts to enhance shareholders’ value.
First Business Financial delivered positive earnings surprises in two of the last four quarters with an average beat of 7.22%. In the last reported quarter, the company posted impressive results delivering a positive earnings surprise of nearly 11.0%. Earnings also fared well year over year.
The better-than-expected results were primarily driven by sustained growth in high quality loans, better asset quality and successful execution of First Business Financial’s initiatives to enhance its full banking relationship with executives, businesses and high net-worth individuals.
First Business Financial’s top–line grew 5% year over year in the third quarter riding on the strength of higher net interest income that in turn was driven by consistent growth in the loan and lease portfolio as well as on reduced cost of interest-bearing liabilities.
While efficiency ratio improved 362 basis points year over year, net interest margin increased 6 basis points.
The company has been consistently paying cash dividends to its shareholders, retaining investor confidence as well as attracting new investors. . Moreover, after a hiatus of 5 years, the board of directors raised the quarterly cash dividend by 100% in Jun 2013. First Business Financial’s dividend of 14 cents per share currently yields 1.46%.
These positives led the company to witness rising estimates. The Zacks Consensus Estimate moved north by 3% to $3.39 per share over the last 60 days, as all the estimates were revised upward. For 2014, the Zacks Consensus Estimate went up 3.5% to $3.54 per share over the same period. The expected long-term earnings growth of First Business Financial is 5%.
Valuation for First Business Financial looks reasonable. The shares are trading at a discount to the peer group average on a price-to-book basis but at a slight premium on a forward price-to-earnings basis, return on equity is also slightly higher than the return of the peer group. The 1-year return from the stock was 62.6%, above the Nasdaq’s return of 34.1%.
First Business Financial presently carries a Zacks Rank #2 (Buy). Some other stocks worth considering in the financial sector include First Interstate Bancsystem Inc. (FIBK), German American Bancorp Inc. (GABC) and PrivateBancorp Inc. (PVTB). All these stocks sport a Zacks Rank #1 (Strong Buy).