U.S. Markets closed

Elevated Costs, Risky Loans Hurt Zions (ZION): Time to Sell?

Zacks Equity Research

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).

Legalizing THIS Could Be Even Bigger than Marijuana

Americans spend an estimated $150 billion in this industry every year… more than twice as much as they spend on marijuana.

Now that 8 states have fully-legalized it (with several more states following close behind), Zacks has identified 5 stocks that could soar in response to the powerful demand. One industry insider described the future as “mind-blowing” – and early investors can still get in ahead of the surge.

See these 5 “sin stocks” now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Zions Bancorporation (ZION) : Free Stock Analysis Report
T. Rowe Price Group, Inc. (TROW) : Free Stock Analysis Report
AllianceBernstein Holding L.P. (AB) : Free Stock Analysis Report
Victory Capital Holdings, Inc. (VCTR) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research