6 Reasons to Invest in Associated Banc-Corp (ASB) Stock
With 2021 turning out to be good for bank stocks despite low interest rate and soft loan demand challenges, it seems to be a wise idea to add Associated Banc-Corp ASB stock to your portfolio. The company’s organic and inorganic growth efforts are likely to continue enhancing profitability. Further, it has been undertaking steps to improve operating efficiency.
The company is also witnessing upward earnings estimate revisions, reflecting analysts’ optimism regarding its earnings growth potential. In the past seven days, the Zacks Consensus Estimate for earnings moved 5.3% and 1.9% upward for 2021 and 2022, respectively. The stock currently carries a Zacks Rank #2 (Buy).
Shares of Associated Banc-Corp have gained 29.6% so far this year, outperforming the industry's 15% rally.
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Why is the Stock a Solid Pick?
Earnings Growth: In the past three to five years, Associated Banc-Corp recorded earnings growth of 3.1%. The company’s earnings are projected to grow nearly 7% this year.
The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing three quarters, the average surprise being 24.48%.
Revenue Strength: Associated Banc-Corp is witnessing a steady improvement in revenues. The company’s total revenues recorded a compound annual growth rate (CAGR) of 4.8% over the last five years (2016-2020). It expects expansion of its lending capabilities (as part of its new strategic plan) to help drive incremental revenues, going forward.
While revenues are expected to decline 17.3% for 2021, the same will likely grow at the rate of 3.9% for next year.
Opportunistic Acquisitions: Given a solid balance sheet position, Associated Banc-Corp is well-positioned to grow further on the back of strategic acquisitions. Last year, the company acquired First Staunton Bancshares while in 2019, it acquired 32 branches in Wisconsin. In the first half of 2018, it had acquired Anderson Insurance, Diversified Insurance Solutions, and Bank Mutual. These deals are expected to be accretive to the company’s earnings.
Strategic Business Restructuring Plan: Similar to many other banks like Hilltop Holdings Inc. HTH, Northwest Bancshares, Inc. NWBI, and PacWest Bancorp PACW, Associated Banc-Corp has been undertaking several measures to improve operating efficiency. In September, the company announced a new expansion plan, which will bolster operating leverage and improve lending and digital capabilities. Thus, it expects net total revenues to witness a CAGR of roughly 8% from the end of 2021 through 2023.
Earlier, in 2020, the company had announced branch optimization efforts, which will result in annual cost savings. Further, in March 2021, it sold its wealth management subsidiary Whitnell & Co. while last year, the company divested its insurance business — Associated Benefits & Risk Consulting.
Steady Capital-Deployment Activities: Associated Banc-Corp is committed toward enhancing shareholders’ value. The company has been raising dividends on a regular basis. The last hike was announced in July 2021.
Further, in December 2019, the company had announced an additional share repurchase authorization worth up to $150 million. While the bank suspended share buybacks in 2020 to enhance liquidity amid the coronavirus-related concerns, it resumed the same in first-quarter 2021. As Jun 30, 2021, nearly $65 million remained under the authorization. Associated Banc-Corp’s capital deployment activities look sustainable on the back of its earnings strength and efforts to improve liquidity position.
Reasonable Valuation: Associated Banc-Corp looks undervalued right now compared with its broader industry. It currently has a price-to-earnings ratio of 11.10, lower than the industry average of 11.16. Also, its price-to-book ratio of 0.89 is below the industry’s 1.15.
Moreover, the stock has a Value Score of A. The Value Style Score condenses all valuation metrics into one actionable score, which helps investors steer clear of 'value traps' and identify stocks that are truly trading at a discount.
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Hilltop Holdings Inc. (HTH) : Free Stock Analysis Report
PacWest Bancorp (PACW) : Free Stock Analysis Report
Northwest Bancshares, Inc. (NWBI) : Free Stock Analysis Report
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