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Cullen/Frost (CFR) Gains 36.1% YTD: Will the Rally Continue?

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Shares of Cullen/Frost Bankers, Inc. CFR have rallied 36.1% year to date compared with 28.5% growth of the industry. The stock has also surpassed the S&P 500’s rally of 12.2% in the same time frame.

The recent price movement of the stock compares favorably with the disappointing 2020 performance. The company’s shares lost 10.8% last year, mainly owing to the coronavirus outbreak.

The impressive price performance so far this year is backed by the bank’s increasing revenue base, rising loan and deposit balances as well as enhanced capital-deployment initiatives. Also, the company’s improving debt level and credit quality continue to support its financials.

Further, increased optimism driven by an accelerated recovery of the banking industry, aided by an extensive vaccination drive and stimulus payments, favored the company’s price performance.

Moreover, this Zacks Rank #2 (Buy) stock has been witnessing upward earnings estimate revisions. Over the past 30 days, the Zacks Consensus Estimate for 2021 and 2022 has moved 14.4% and 3.5% north, respectively.

Year-to-Date Performance

So, will this bullish trend for Cullen/Frost continue for the rest of the year? Let’s check the company’s fundamentals before deciding.

Revenue Strength: Cullen/Frost has been witnessing continued improvement in revenues. Over the past five years (2016-2020), total revenues witnessed a compound annual growth rate (CAGR) of 6.4%. Moreover, the low-cost funding source — non-interest-bearing deposits (representing more than 56% of total deposits) — is expected to boost the net interest income and margin.

Strong Balance Sheet Position: As of Mar 31, 2021, the company held debt worth $2.16 billion, which has been stable in the past few quarters. Also, debt-to-capital ratio of 5.2 has been witnessing a downward trend. The company’s time-interest-earned ratio of 43.5 has witnessed a rising trend for the past few quarters. Notably, backed by consistent earnings and strong cash position ($11.8 billion as of Mar 31) Cullen/Frost has lesser likelihood of default of interest and debt repayments, if the economic situation worsens.

Impressive Capital Deployment: We remain encouraged by Cullen/Frost’s steady capital-deployment activities. Notably, it has increased dividends annually for 27 consecutive years, the latest being in October 2020. Also, in January 2021, its board of directors approved a $100-million common stock-repurchase program. This reflects the company’s commitment to returning value to its shareholders, backed by a strong capital position.

Strong Leverage: Cullen/Frost’s debt/equity ratio is 0.06 compared with the industry average of 0.19, indicating a relatively lower debt burden. This reflects the company’s financial stability amid adverse economic conditions.

Favorable Zacks Industry Rank: Cullen/Frost is part of that Zacks industry, which currently carries a Zacks Industry Rank #26 (placing it at the top 10% of more than 250 Zacks industries).

The Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Other Key Picks

Artisan Partners Asset Management Inc. APAM has been witnessing upward estimate revision for 2021 over the past 30 days. The company’s shares have rallied 1% so far this year. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bank of Hawaii Corporation’s BOH shares have gained 17.7% so far this year. Further, the company’s earnings estimates for the ongoing year have moved 11.1% north in the past 60 days. It currently has a Zacks Rank of 2.

UMB Financial Corporation UMBF has been witnessing upward estimates revision for the current-year over the past 30 days. Shares of this Zacks #2 Ranked stock have gained more than 40% so far this year.

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UMB Financial Corporation (UMBF) : Free Stock Analysis Report

CullenFrost Bankers, Inc. (CFR) : Free Stock Analysis Report

Bank of Hawaii Corporation (BOH) : Free Stock Analysis Report

Artisan Partners Asset Management Inc. (APAM) : Free Stock Analysis Report

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