We issued an updated research report on SunTrust Banks, Inc. (STI) on May 28, 2014. The company reported better-than-expected first-quarter results. Efficient capital deployment activities and prudent expenses management are the company’s strengths. Nevertheless, we remain concerned about the overall subdued economic scenario and regulatory pressure.
SunTrust released its first-quarter 2014 earnings on Apr 21. Results not only surpassed the Zacks Consensus Estimate by 9.0% but also rose 15.9% year over year. Results benefited from lower provision for credit losses and prudent expense management, partially offset by decline in revenue.
SunTrust is an asset for yield-seeking investors. Given its strong capital position, we believe that the company will consistently return capital to shareholders in form of dividends and shares buybacks in the quarters to follow. Further, the company remains focused on measures to improve revenues and cut costs, which will aid efficiency improvement in the long run.
Following the impressive first-quarter results, the Zacks Consensus Estimate for 2014 increased 3.3% to $3.13 per share over the last 60 days. Further, for 2015, the Zacks Consensus Estimate climbed 1.0% to $3.32 per share over the same time period.
On the flip side, the company’s considerable exposure to commercial and residential loan portfolios keeps us skeptical. Though the housing market has recovered, any further deterioration in real estate prices will pose a problem to the company.
Currently, SunTrust has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked banks include BofI Holding, Inc. (BOFI), Central Pacific Financial Corp. (CPF) and CVB Financial Corp. (CVBF). All these stocks sport a Zacks Rank #1 (Strong Buy).