Zions Bancorporation, National Association ZION appears to be a solid bet, given its strong balance sheet backed by solid loans and deposit balances. Further, the company’s efficient capital deployment activities enhance shareholder value.
Analysts seem to be optimistic regarding the company’s earnings growth potential.
The Zacks Consensus Estimate for both 2022 and 2023 earnings has been revised 2.1% upward over the past 30 days. Zions currently sports a Zacks Rank #1 (Strong Buy).
Looking at its price performance, shares of the company have rallied 25.3% over the past year compared with a 12.6% rise recorded by the industry.
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6 Reasons Why Zions is a Must Buy Now
Earnings growth: Zions witnessed earnings growth of 17.1% in the past three to five years, higher than the industry average of 10.4%. While the company’s earnings are projected to decline 27% for 2022, the same are expected to witness growth of 18.8% in 2023.
Also, the company has an impressive earnings surprise history. Zions’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 34.36%.
Further, the company’s earnings are projected to grow at the rate of 17.5% over the next five years.
Revenue strength: Zions’ revenues witnessed a compound annual growth rate (“CAGR”) of 2.8% in the last five years (2017-2021), driven by a robust loan balance, with net loans and leases (net of unearned income and fees) recording a CAGR of 3.2% over the same time frame. The bank's high non-interest-bearing deposits balance also aids its financials. With favorable macroeconomic developments and continued rise in demand for loans, the bank is likely to witness further increase in revenues.
While Zions’ 2022 revenues are projected to decline 1.6%, the same is expected to rebound and grow 9% next year.
Strong Balance Sheet: Zions has a total debt of $1.91 billion, and cash and cash equivalents balance of $595 million, as on Dec 31, 2021. Its debt is mostly long term in nature and times-interest-earned ratio of 50.9 at the end of 2021 reflects a substantial improvement over the year. The company’s investment-grade ratings of BBB+ and a stable outlook from both S&P Global and Fitch Ratings helps it gain easy access to the debt market. Zions is likely to continue to meet debt obligations even if the economic situation worsens, given the earnings strength.
Steady Capital Deployment: In July 2021, Zions announced an 11.7% hike in its quarterly dividend to 38 cents per share. The company has a share buyback program in place. In 2021, it repurchased 13.5 million shares for $800 million. For the first quarter of 2022, the bank has authorized buyback of up to $50 million. Given its robust capital position and lower dividend payout ratio compared with peers, the company’s capital deployment activities seem sustainable and will continue to enhance shareholder value.
Stock Seems Undervalued: With respect to its current PEG and price/cash flow ratios, Zions looks undervalued. The company’s PEG ratio of 0.84 is below the industry average of 1.21. Also, the price/cash flow ratio of the company is 9.11 compared with the industry average of 11.56.
Superior Return on Equity (ROE): Zions’ ROE of 15.4% compared with the industry average of 12.2% highlights the company’s commendable position over its peers.
Other Stocks Worth Considering
A couple of other stocks from the finance space worth a look are Morgan Stanley MS and First Business Financial Services FBIZ. Morgan Stanley carries a Zacks Rank #2 (Buy) while FBIZ sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Morgan Stanley’s current-year earnings has been revised 4.2% upward over the past 60 days.
MS’s shares have risen 7% in the past year.
First Business recorded an upward earnings estimate revision of 9% for 2022 over the past 60 days.
The FBIZ stock has jumped 41.3% in the past year.
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