With the focus on opportunistic acquisitions, and growing deposit and loan balances, People's United Financial, Inc. PBCT appears a promising buying opportunity now. In addition, the recent interest-rate hikes are anticipated to further stabilize the top line.
Though increasing risks and compliance requirements remain a concern for People's United, management is taking steps to keep a check on expense growth. This, in turn, is anticipated to make the growth path smoother.
Therefore, it’s a good idea to add stocks with robust fundamentals and long-term growth opportunities to your portfolio, at the current level.
Additionally, this Zacks Rank #2 (Buy) stock has gained 4.5% in a year’s time compared with 13.4% growth recorded by the industry it belongs to.
Why is People's United an Attractive Pick
Benefit from Rate Hike: With a rise in rates, banks are likely to engage in more investment activities. This rate hike will also allow banks to lend at higher rates. As People's United currently derives around 74% of its revenues from net interest income, the company is set to benefit from recent rate hikes.
Strategic Moves: People’s United continues to benefit from a healthy business portfolio which has grown inorganically over time. In April 2017, the company completed the $391-million all-stock deal to acquire Riverhead-based Suffolk Bancorp, which is set to fortify its footprint in the New York Metro region. Recently, it acquired LEAF Commercial Capital — an independent commercial equipment finance provider. In line with its strategy to boost fee income businesses, the company completed the acquisition of Gerstein Fisher, a $3-billion New York-based investment management firm, last year. The company remains focused on opportunistic acquisitions that support its long-term growth profile.
Earnings Strength: People's United recorded earnings growth rate of 6.1% over the last three to five years. Retaining the earnings momentum, the earnings growth rate is anticipated to be around 1% for the current year and 15.6% for 2018. Good news is that the company recorded an average positive earnings surprise of 3.26% over the trailing four quarters.
Steady Capital Deployment Activities: People's United remains focused on managing capital levels efficiently. In April 2017, the company raised its quarterly dividend by 1.5% to 17.25 cents per share, marking the 24th consecutive annual dividend hike.
Stock is Undervalued: People's United has P/E and P/B ratios of 17.34 and 1.06 compared to the S&P 500 average of 18.59 and 3.15, respectively. Based on these ratios, the stock seems undervalued.
Other top-ranked stocks in the same space are FB Financial Corporation FBK, LPL Financial Holdings Inc. LPLA and Salisbury Bancorp, Inc. SAL. All three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FB Financial’s earnings estimates have been revised 3.2% upward for 2017, in the past 60 days. Also, its share price has surged 69.6% in the last year.
LPL Financial’s earnings estimates for 2017 have been revised 4.1% upward, over the last 60 days. Further, in a year’s time, the company’s shares have jumped 61.2%.
Salisbury Bancorp witnessed a 2.4% upward earnings estimates revision for the current year, over the last 60 days. Moreover, in the past year, its shares have gained 38.9%.
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FB Financial Corporation (FBK) : Free Stock Analysis Report
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