HPT vs. HCP: Which Stock Should Value Investors Buy Now?
The Finance sector was one of the best performers in the Q1 earnings season. Despite rising chances of political uncertainty, we can add some banking stocks to our portfolio based on the banks’ strong fundamentals and solid long-term prospects. Moreover, easing of regulations, financial stability and tax reform are expected to yield improved profitability for banks.
With impressive revenue growth, as well as improving deposit and loan balances, Cullen/Frost Bankers, Inc. CFR appears a promising buying opportunity now. Further, the recent interest rate hike is anticipated to stabilize the top line.
Cullen/Frost not only beat estimates in the first quarter, but its Zacks Consensus Estimate also moved north, reflecting analysts’ optimism about the company’s future prospects. Over the last 60 days, the Zacks Consensus Estimate for 2018 and 2019 moved up 4% and 4.6%, respectively.
Also, shares of this Zacks Rank #1 (Strong Buy) company have gained around 21.9% over the past year compared with 7.4% growth recorded by the industry.
Notably, Cullen/Frost has a number of other aspects which make it an attractive investment option.
Why Cullen/Frost is an Attractive Buy
Revenue Growth: Organic growth remains a key strength at Cullen/Frost, as reflected by its revenue growth story. Revenues witnessed a CAGR of 8%, over the last five years, (2013-2017), with the trend continuing into first-quarter 2018 as well.
The company’s projected sales growth (F1/F0) of 17.31% (as against the nil industry average) indicates constant upward momentum in revenues.
Earnings Per Share Strength: Cullen/Frost witnessed earnings growth of 8.11% over the past three-five years. In addition, the company’s long-term (three-five years) estimated EPS growth rate of 9.5% promises rewards for investors, over the long run. Also, it recorded an average positive earnings surprise of 5.36% over the trailing four quarters.
Strong Leverage: Cullen/Frost’s debt/equity ratio is valued at 0.08, compared to the industry’s average of 0.46, displaying lower debt burden relative to the industry. It highlights the financial stability of the company even in an unstable economic environment.
Steady Capital Deployment: Cullen/Frost manages its capital levels efficiently. In April 2018, the company hiked its quarterly stock dividend by 17.5%. Notably, it has raised dividends annually for 25 consecutive years. Also, in 2017, its board of directors approved a $150-million common stock-repurchase program. This underlines the company’s commitment to return value to shareholders.
Superior Return on Equity (ROE): Cullen/Frost’s ROE of 12.34%, as compared with the industry average of 10.02%, reflects the company’s commendable position over its peers.
Stock is Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Stocks to Consider
Commerce Bancshares, Inc. CBSH has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock has jumped more than 22% in the past year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Old Second Bancorp, Inc. OSBC has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 33.3% over the past year. It holds a Zacks Rank of 2, at present.
Comerica Incorporated CMA has been witnessing upward estimate revisions for the last 60 days. In a year’s time, this Zacks #2 Ranked company’s share price has been up more than 30%.
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Comerica Incorporated (CMA) : Free Stock Analysis Report
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Cullen/Frost Bankers, Inc. (CFR) : Free Stock Analysis Report
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