5 Reasons to Add Cullen/Frost (CFR) to Your Portfolio Now
It seems to be a wise idea to add Cullen/Frost Bankers, Inc. CFR stock to your portfolio now. Supported by strong fundamentals, the company is well poised for growth.
The Zacks Consensus Estimate for CFR’s current-year earnings has been marginally revised upward over the past 30 days, reflecting that analysts are optimistic regarding its earnings growth potential. CFR currently carries a Zacks Rank #2 (Buy).
Over the past six months, the stock has risen 3.5% compared with the industry’s growth of 14.4%.
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There are some other factors mentioned below that make Cullen/Frost an attractive investment option now.
Earnings Strength: Over the last three to five years, the company witnessed earnings growth of 11.01%. The upward trend is expected to continue in the near term. In 2023, CFR’s earnings are projected to grow 9.3%.
Moreover, the company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 6.46%.
Expansion Efforts: Cullen/Frost continues to enhance its presence in the lucrative Texas markets. In June, the company announced plans to double its financial centers to 34 in the Austin region by 2026. The region is the third largest deposit market in Texas, where the company ranks fourth in market share, having more than $5 billion in deposits. Management expects to open approximately 15 new branches in the Texas region in 2024.
In 2021, the firm completed its 25-branch-expansion program in the Houston region. Capitalizing on the success of its footprint growth in Houston, the company planned a similar 28-branch-expansion in Dallas. In April 2023, the Dallas branch expansion reached its halfway mark. Given the pro-business and a low-tax scenario along with compelling customer demographics in the region, Cullen/Frost should see deposit and loan growth.
Balance Sheet Strength: CFR witnessed a three-year compound annual growth rate (CAGR) of 16.7% (2019-2022), while loans recorded a CAGR of 5.2%. The rising trend for loans continued in the first nine months of 2023.
Moreover, given its solid loan pipeline along with new branch openings in 2024, we believe that the company would witness decent loan demand going forward. We estimate loans and deposits to record a CAGR of 6.3% and 1%, respectively, over the next three years (ended 2025).
Strong Leverage: Cullen/Frost’s debt/equity ratio is 0.08, lower than the industry average of 0.29. Given the relatively lower debt/equity ratio than its peers, the company is expected to be financially stable, even in adverse economic conditions.
Superior Return on Equity (ROE): CFR’s ROE of 22.13% compares favorably with the industry average of 13.18%. This highlights the company’s commendable position over its peers in using shareholders’ funds.
Other Bank Stocks Worth Considering
A couple of other top-ranked stocks from the banking space are WSFS Financial Corporation WSFS and Hilltop Holdings HTH.
Earnings estimates for WSFS have remained unchanged for 2023 over the past 30 days at $4.47. The company’s shares have gained 29.9% over the past six months. WSFS Financial currently carries a Zacks Rank #2.
Hilltop Holdings’ earnings estimates have moved 1.8% north for the current year to $1.65 over the past 30 days. In the past six-month period, HTH’s shares have improved 14.1%. The company sports a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Hilltop Holdings Inc. (HTH) : Free Stock Analysis Report
Cullen/Frost Bankers, Inc. (CFR) : Free Stock Analysis Report
WSFS Financial Corporation (WSFS) : Free Stock Analysis Report
