Underlying strength and earnings growth prospects make First Commonwealth Financial Corporation FCF a solid bet now. The company’s organic growth strategies have positioned it well for growth. Also, an improving operating backdrop, a rising rate environment and expectations of lesser regulations are likely to further support profitability.
Analysts seem to be optimistic about the company’s prospects as the stock has been witnessing upward estimate revisions. Over the past 60 days, the Zacks Consensus Estimate for 2017 earnings has been revised 2.5% upward to 82 cents. As a result, it currently carries a Zacks Rank #2 (Buy).
Also, the stock has rallied 15% over the past six months, outperforming the industry’s gain of 3.9%.
Factors That Make the Stock an Attractive Pick
Revenue Strength: First Commonwealth’s revenues witnessed a CAGR of 3.5% over the last three years (2014-2016). This is supported by the company’s decent loan and deposit growth as well as improving fee income. Hence, the top line is expected to grow 16.9% in 2017 and 7.6% in 2018.
Earnings Growth: First Commonwealth recorded earnings growth of 15.5% over the last three to five years. The momentum is expected to continue as the earnings growth rate for the current year is anticipated to be 18.8% compared with the industry average of 10.5%.
Steady Growth Through Acquisitions: First Commonwealth has been steadily expanding inorganically. In April, the company acquired DCB Financial Corporation, thereby expanding its market share in central Ohio. Earlier in 2016, it acquired 13 branches from FirstMerit Bank, while in 2015 it forayed into central Ohio with the buyout of First Community Bank. Given its strong liquidity position, the company will likely continue with its inorganic growth strategy.
Lower Expenses: First Commonwealth has been witnessing a continued fall in expenses. Over the last three years, costs have declined at a CAGR of 3.4%. Though expenses are anticipated rise marginally in the quarters ahead owing to inorganic growth plan, these are likely to remain manageable.
Strong Leverage: First Commonwealth’s debt/equity ratio is 0.09 compared with the industry average of 0.52. The relatively strong financial health of the company will help it perform better than its peers under a dynamic business environment.
Superior ROE: First Commonwealth’s return on equity (ROE) supports growth potential. Its ROE of 9.53% compares favorably with the industry’s 8.79% average, implying that it is efficient in using its shareholders’ funds.
Other Stocks Worth a Look
Some other top-ranked stocks in the space are Washington Federal WAFD, Eagle Bancorp EGBN and NBT Bancorp Inc. NBTB. All the stocks carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Washington Federal’s earnings estimates were revised around 1% upward for fiscal 2018 in the last 60 days. Also, its share price has risen 5.7% over the past six months.
Eagle Bancorp’s earnings estimates for 2017 have been revised 2.5% upward over the last 60 days. Further, in the past six months, the company’s shares have gained 13.9%.
NBT Bancorp witnessed a 2% rise in earnings estimates for the current year over the last 60 days. Moreover, over the past six months, its shares have gained 3.7%.
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