Driven by the rising rate environment and steady loan growth, banks seem well-positioned for growth in the near term. Hence, it is a wise idea to invest in bank stocks now. One such bank is BankUnited, Inc. BKU, which is poised for top-line growth, given its solid balance sheet, improving loan balances and efforts to strengthen fee income sources.
Moreover, analysts are optimistic regarding the company’s earnings growth prospects. Over the past 60 days, the Zacks Consensus Estimate for BKU’s current-year earnings has been revised 1% upward. Thus, BKU currently carries a Zacks Rank #2 (Buy).
Over the past year, shares of the company have lost 12.6% compared with a decline of 19.3% recorded by the industry.
Image Source: Zacks Investment Research
Mentioned below are the factors that make BKU an attractive investment option now.
Revenue Strength: BankUnited’s revenues witnessed a seven-year (2015-2021) compound annual growth rate (CAGR) of 1.5%. The uptrend continued in the first half of 2022. With decent growth in loans and the company's efforts to improve fee income, its top line is expected to improve.
In 2022, the top line is expected to grow 6.8%, while in 2023, revenues are projected to increase 8.2%.
Earnings Growth: Over the last three to five years, BankUnited witnessed earnings growth of 7.8%. While the company’s earnings are projected to decline 18.1% this year, the trend will likely reverse after that. In 2023, earnings are expected to grow 12.6%.
Sustainable Capital Deployments: BankUnited has an impressive capital deployment plan. For the first time, the company hiked its quarterly dividend by 10% to 23 cents per share in February 2020 and by 8.7% to 25 cents per share in March 2022.
Further, it has a share repurchase program in place. In May 2022, the company's board of directors authorized the repurchase of up to an additional $150 million worth of shares, with no expiration date. As of Jun 30, 2022, almost $150 million worth of shares were left to be repurchased.
Thus, the company's earnings strength is expected to help it sustain efficient capital deployment activities in the future, through which it will enhance shareholder value.
Valuation Favorable: BankUnited stock looks undervalued when compared with the broader industry. Its current price/sales (P/S) and price/book (P/B) ratios are below the respective industry averages. BKU has a P/S ratio of 2.65, slightly below the industry average of 2.69. Its P/B ratio stands at 1.13, below the industry’s 1.31.
Other Bank Stocks Worth a Look
A couple of other top-ranked bank stocks are East West Bancorp EWBC and Bank OZK OZK. EWBC currently sports a Zacks Rank #1 (Strong Buy), while OZK carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past 60 days, the Zacks Consensus Estimate for East West Bancorp’s current-year earnings has been revised 9% upward, while the same for Bank OZK has moved 7.2% north.
So far this year, shares of East West Bancorp have lost 10.4%, while Bank OZK has declined 13.7%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
BankUnited, Inc. (BKU) : Free Stock Analysis Report
East West Bancorp, Inc. (EWBC) : Free Stock Analysis Report
Bank OZK (OZK) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research