Webster Financial WBS seems to be a wise investment option now based on its underlying strength and earnings growth prospects. The factors that indicate the stock’s upside potential include impressive organic growth, improving credit quality and a solid balance sheet.
Further, with the easing of regulations and lift in threshold for systemically important financial institutions to $250 billion, Webster will be able to make expansion moves. Also, rising interest rates will support its top line.
In addition, it has been successful in gaining analysts’ confidence. Its current-year earnings estimates have been revised 1.5% upward over the past 60 days. As a result, the stock carries a Zacks Rank #2 (Buy).
Shares of Webster have gained 9.8% over the past three months compared with the industry’s rally of 10.6%.
What Makes the Stock Attractive
Revenue Strength: The company has been witnessing consistent improvement in revenues. Over the last five years (ended 2018), total revenues recorded a compound annual growth rate (CAGR) of 9.8%.
Additionally, the upward trend is expected to continue in 2019 at a growth rate of 7.2% backed by rising interest rates environment and Webster’s focus on bolstering fee income sources.
Impressive Balance Sheet Growth: Webster’s loans and deposits have witnessed a CAGR of 7.5% and 8.7%, respectively, over a five-year period (ended 2018). Further, management expects average loan growth to be 1% on a sequential basis. Also, both loan and deposit balances are likely to get support from an improving economy.
Improving Credit Quality: Webster’s credit quality has improved significantly over the years. In 2018, ratio of non-performing loans to total loans declined to 0.84% from 1.28% in 2013. Also, the ratio of net-charge offs to average loans came in at 0.16% compared with 0.47% in 2013.
Earnings per Share Growth: The company has recorded an earnings growth rate of 11.51%, over the last three to five years compared with 11.13% for the industry it belongs to. Moreover, this earnings momentum is likely to continue in the near term as the company’s projected EPS growth (F1/F0) is 11.17% compared with 8.75% for the industry.
Also, Webster has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 5.17%.
Superior Return on Equity: Webster has a return on equity of 13.36% compared with the industry average of 10.31%. This indicates that the company is efficient in utilizing shareholder funds.
Other Stocks to Consider
Atlantic Capital Bancshares ACBI has witnessed 4.6% upward estimate revisions for current-year earnings over the past 60 days. Over the past three months, the company’s share price has been up 15.9%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Sterling Bancorp’s STL current-year earnings estimates have been revised 3% upward for the past 60 days. In addition, the stock has jumped 16.8% over the past three months. It currently carries a Zacks Rank of 2.
Camden National Corporation CAC has witnessed 1.4% upward estimate revision for current-year earnings over the past 60 days. Also, the company’s shares have risen 20.7% over the past three months. It currently carries a Zacks Rank #2.
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Webster Financial Corporation (WBS) : Free Stock Analysis Report
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