Citizens Financial Group, American Railcar Industries, Glacier Bancorp, Capitol Federal Financial and Hope Bancorp highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – December 07, 2016 – Zacks Equity Research highlights Citizens Financial Group, Inc. (NYSE:CFG – Free Report) as the Bull of the Day and American Railcar Industries, Inc. (NASDAQ:ARII – Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Glacier Bancorp, Inc. (NASDAQ:GBCI –Free Report),Capitol Federal Financial, Inc. (NASDAQ:CFFN –Free Report) and Hope Bancorp, Inc. (NASDAQ:HOPE – Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Citizens Financial Group, Inc. (NYSE:CFG – Free Report) is a regional bank set to cash in as interest rates rise. This Zacks Rank #1 (Strong Buy) is growing its earnings by the double digits as it expands its fee services and sees strong loan growth.
Citizens Bank is a regional bank headquartered in Providence, Rhode Island with $147 billion in assets as of September 30, 2016. It offers retail and commercial banking products to individuals, small businesses, middle market companies and large corporations.
It has 1,200 Citizens Bank branches in 11 states in the New England, Mid-Atlantic and Midwest areas.
The Move to Online Investing
On Dec 1, it announced it was expanding its Citizens Investment Services to offer digital investing capabilities as part of its Wealth Management platform.
It will be offered through SigFig, a Silicon Valley financial start-up that offers an online investing platform through its mobile app.
It will give customers the ability to fund investing strategies through an existing bank or brokerage account.
Citizens has been expanding its wealth management services.
The Turnaround Plan Continues
Citizens is executing its turnaround plan which is growing loans, investing in fee services and controlling costs.
It beat earnings again in the third quarter, beating the Zacks Consensus Estimate by 3 cents. Earnings were $0.52 compared to the Zacks Consensus of $0.49.
Citizens believes the consumer is healthy. It is seeing home refinancing and consolidation of education loans.
In the third quarter, it hired 47 mortgage loan officers and 11 financial consultants bringing the company-wide totals to 500 mortgage originators and 350 financial consultants by the end of the quarter.
In Commercial Banking, it generated 11% average loan growth quarter over quarter as it made progress in mid-corporate and industry verticals, commercial real estate and franchise finance.
Treasury Solutions fee income was up 10% from the third quarter of 2015.
Bear of the Day :
American Railcar Industries, Inc. (NASDAQ:ARII – Free Report) can't escape the rail car cycle, which is still on a downward trajectory. This Zacks Rank #5 (Strong Sell) is expected to see falling sales and earnings through 2017.
American Railcar makes and sells railcars, specifically hopper and tank cars, custom designed railcar parts and other industrial products. It also leases railcars it manufactures to some markets.
Additionally, the company provides railcar repair services through various repair facilities.
Another Miss in the Third Quarter
On Oct 28, American Railcar reported its third quarter results and missed on the Zacks Consensus Estimate by 5 cents. Earnings were $0.94 compared to the Zacks Consensus of $0.99.
It was the second earnings miss of the year for the company.
It continued to see "softness" in the North American railcar market.
Revenue fell 16% to $145 million from $172.7 million in the third quarter of 2015. The decrease came from lower revenue in the manufacturing segment, partially offset by increased revenue in the leasing and railcar services segments.
Manufacturing segment revenue fell 24% to $93.5 million driven by a higher mix of hopper railcars sold, which generally have a lower average selling price than the tank railcars.
Tank railcar demand continues to be challenged as the crude market remains subdued.
Backlog Declines
The backlog, as of September 30, 2016 was 5,085 railcars with an estimated value of $490.2 million. Of the total backlog, 1,904 railcars, or 38%, were subject to lease with an estimated market value of $179.1 million.
For comparison purposes, the backlog at the end of the first quarter, as of March 31, 2016, was 5,986 railcars with an estimated value of $569.1 million.
The company has plenty of cash on hand, with working capital of $241.1 million, including $198 million in cash and cash equivalent. Therefore, it continues to pay a dividend and repurchase shares. It has $175.1 million available in its stock repurchase plan.
The dividend is currently yielding 3.5%.
Estimates Continue to Fall
Even though the economy is still humming along, the railcar makers can't escape from the railcar cycles. It's currently in the downward trajectory of one.
Here are the earnings and expected earnings estimates for the last 3 years:
2015 earnings: $6.46 per share
2016 expected earnings: $4.11, down 36%
2017 expected earnings: $3.23, down 21%
The 2017 Zacks Consensus Estimate has fallen to $3.23 from $3.45 in the last 60 days.
Additional content:
Bank Stocks to Avoid Despite High Chance of Rate Hike
A slew of strong economic data and favorable comments from Fed officials have set the stage for a rate hike later this month. Per the CME Group FedWatch tool, the odds of a December rate hike are now nearly 95%.
Strong retail sales, an improving housing market, firming inflation rate and record low unemployment are likely to satisfy the Fed’s criteria for increasing rates in its meeting on Dec 13–14. The Fed Chairwoman Janet Yellen’s testimony at Congress’s Joint Economic Committee last week that the rise in rates will happen “relatively soon” further reinforces expectations for the same.
Following the hike last December, several rate sensitive banks witnessed an uptick in net interest income and net interest margin. Hence, another rate hike will modestly support the banks’ top-line growth, which has been under pressure amid a challenging operating environment.
Profitability of banks was challenged by several matters, including stringent regulations and rising expense base (huge legal costs to resolve legacy issues, compliance expenses and investments in technology upgrades). Moreover, low levels of oil prices have affected many banks’ asset quality owing to the need for higher provisions to cover delinquent energy sector loans.
Further, for banks with international exposure, several factors like negative interest rates in Eurozone and Japan, slowdown in Chinese economy and continued weakness in emerging markets have contributed to growth concerns.
Therefore, to mitigate these concerns, banks are undertaking defensive measures including slashing jobs, curtailing unprofitable/non-core businesses and reducing footprints. Also, they are looking for avenues to diversify revenue sources. However, these are not adequate to generate stable returns. Also, another possible rate hike is not likely to be enough to confront the larger challenges in the banking industry.
Amid such a tough operating backdrop, we suggest avoiding certain banking stocks that don’t look attractive even if the Fed raises rates later this month.
Banking Stocks to Dump Now
While it’s not easy to select such stocks from the vast banking sector universe, we have taken the help of Zacks Stock Screener to make this task relatively simpler.
We have shortlisted five banking stocks with a market capitalization of at least $1 billion and a VGM Score of ‘F.’ Further, these stocks carry a Zacks Rank #4 (Sell) or #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Glacier Bancorp, Inc. (NASDAQ:GBCI – Free Report) : With a market cap of $2.7 billion, this West bank currently has a Zacks Rank #4. While the company shares’ have outperformed the Zacks categorized West Banks industry in the last six months, the Zacks Consensus Estimate for the company was revised 1.8% downward to $1.60 per share for 2016, over the last 60 days. Hence, the owing to fall in estimates, price performance may not continue in the future.
Capitol Federal Financial, Inc. (NASDAQ:CFFN – Free Report) : This Savings and Loan company, with a market cap of $2.2 billion, has a Zacks Rank #4. The Zacks Consensus Estimate for the company declined 3.1% to 63 cents per share for fiscal 2017, over the last 60 days. Further over the last six months, the stock has underperformed the Zacks categorized Savings and Loan industry.
Hope Bancorp, Inc. (NASDAQ:HOPE – Free Report) : With a market cap of $2.8 billion, this West bank currently has a Zacks Rank #4. While the company shares’ have outperformed the Zacks categorized West Banks industry in the last six months, the Zacks Consensus Estimate for the company was revised 4% downward to $1.21 per share for 2016, over the last 60 days. Hence, the owing to fall in estimates, price performance may not continue in the future.
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CITIZENS FIN GP (CFG): Free Stock Analysis Report
AMER RAILCAR (ARII): Free Stock Analysis Report
GLACIER BANCORP (GBCI): Free Stock Analysis Report
CAPITOL FEDL FN (CFFN): Free Stock Analysis Report
HOPE BANCORP (HOPE): Free Stock Analysis Report
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