Elevated Costs, Risky Loans Hurt Zions (ZION): Time to Sell?
Zions Bancorporation, National Association’s ZION bottom-line growth is expected to be hurt by continuously increasing expenses. Moreover, the company's significant exposure to risky loan portfolios remains a concern.
Its Zacks Consensus Estimate for current-year earnings has been revised 5.2% lower over the past 60 days, reflecting that analysts are not optimistic regarding its earnings growth potential.
Thus, the stock currently carries a Zacks Rank #4 (Sell).
Its price performance also does not seem impressive. Shares of the company have lost 19.2% in the past six months compared with 14.1% decline recorded by the industry.
Looking at its fundamentals, Zions’ expenses recorded a CAGR of 2.3% over the last four years (2015-2018) mainly because of higher salaries and employee benefit costs, net occupancy expenses, and advertising costs. In fact, as the company continues to invest in franchise, operating expenses are expected to increase in the quarters ahead, thereby hurting profitability to an extent.
Moreover, the company has significant exposure to risky loans. Commercial real estate (CRE) assets accounted for nearly 24.3% of the company’s net loans and leases as of Jun 30, 2019. Because of this, raising new capital and removing troubled loans are expected to take precedence over finding growth opportunities, thus hampering financials.
Nevertheless, business simplifying efforts, consistent growth in loans and deposit balances, initiatives to improve operating efficiency, removal of SIFI label, and exemption from being subjected to stringent regulations are expected to continue supporting the company's growth.
Some better-ranked stocks from the finance space are T. Rowe Price Group, Inc. TROW, Victory Capital Holdings, Inc. VCTR and AllianceBernstein Holding L.P. AB.
Over the past 60 days, T. Rowe Price’s Zacks Consensus Estimate for current-year earnings has been revised 3.6% upward. Its share price has increased 19.8% year to date. The stock currently sports a Zacks Rank #1 (Strong Buy).
Victory Capital has witnessed an upward earnings estimate revision of 3.7% for 2019 over the past 60 days. So far this year, the company’s share price has increased 56.2%. The stock flaunts a Zacks Rank of 1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
AllianceBernstein has witnessed an upward earnings estimate revision of 2.1% for 2019 over the past 60 days. Its share price has risen 3.6% so far this year. The stock currently carries a Zacks Rank #2 (Buy).
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