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Underlying strength and revenue growth prospects make City Holding Company CHCO a solid bet now. Strategic efforts to grow presence, capital strength and steady capital deployment activities might drive the stock higher.
Notably, the company has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the beat being 33.6%, on average.
Further, it has been successful in gaining analysts’ confidence. Its current-year earnings estimates have been revised 9.7% upward over the past 30 days. As a result, the stock carries a Zacks Rank #2 (Buy).
Shares of City Holding have gained 14.9% over the past six months compared with the industry’s growth of 51.1%.
What Makes the Stock Attractive
Revenue Strength: The company has been witnessing consistent improvement in revenues. Over the past five years (ended 2019), total revenues recorded a compound annual growth rate (CAGR) of 8.2%.
The upward trend is expected to continue in 2020 at a growth rate of 2.5%, with support from City Holding’s efforts to improve fee income.
Steady Capital Deployment Activities: The company remains committed to enhancing shareholders’ value. In September 2019, it raised its quarterly dividend by 7.5% to 57 cents per share. Also, in February 2019, the board authorized a new share buyback program.
Impressive Balance Sheet Growth: City Holding’s loans and deposits witnessed a CAGR of 7.3% and 8.2%, respectively, over a five-year period (ended 2019). Also, both loan and deposit balances are likely to get support from gradual economic recovery and resumption of business activities.
Earnings per Share Growth: City Holding recorded an earnings growth rate of 15.1% over the last three to five years. While earnings are expected to decline 13.2% in 2020 due to the current economic slowdown and a tough operating backdrop, we believe that the company’s earnings might continue to grow in the near term on its solid growth efforts.
Superior Return on Equity: City Holding has a return on equity of 13.07% compared with the industry average of 8.1%. This indicates that the company is efficient in utilizing shareholder funds.
Strong Leverage: City Holding's debt/equity ratio compares favorably with the industry average. The relatively strong financial health of the company will help it perform better than its peers under an unstable business environment.
Other Stocks to Consider
Some other stocks in the same space worth considering are Ameris Bancorp ABCB, BancorpSouth Bank BXS and Capstar Financial Holdings Inc. CSTR. All these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ameris’ Zacks Consensus Estimate for current-year earnings has been revised 42% upward for 2020 in the past 30 days. Also, its share price has increased 22.9% in the past three months.
BancorpSouth’s current-year earnings estimates have been revised 18.2% upward over the past 30 days. Further, the company’s shares have jumped 10.9% in the past three months.
Capstar’s Zacks Consensus Estimate for current-year earnings have been revised 24.3% upward over the past 30 days. Moreover, in the past three months, its shares have lost 1.6%.
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Capstar Financial Holdings Inc. (CSTR) : Free Stock Analysis Report
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