Barclays PLC BCS has been facing setbacks of late with its shares declining 7.5% so far this year as against industry’s rally of 18.2%. So, what’s the reason for investors’ apathy toward this stock?
Continued pressure on revenues seems to be the primary reason for investors’ apprehension about Barclays’ prospects. Though the company was successful in streamlining its businesses through divestiture/closure of non-core operations that resulted in lowering operating costs, the same led to a decline in the top line.
Specifically, core business performance indicators like net interest income, net fee and commission income and net trading income have persistently reflected muted growth over the past several quarters. Also, the low interest rate environment and weak global economic recovery are expected to continue exerting pressure on Barclays’ business performance.
Another reason for investors’ bearish stance on Barclays is perhaps unending legal matters related to its past business handlings. While considerable progress has been made regarding certain legal issues over the past few years, the bank still faces several underlying challenges. Additional litigation provisions are expected to hamper its bottom line.
Given these concerns, analysts are bearish on the stock as well. The Zacks Consensus Estimate for 2017 and 2018 has declined 1.6% and 3.5%, respectively, over the last 60 days. Hence, this further limits the company’s upside potential.
Barclays currently has a Zacks Rank #4 (Sell) and a Growth Score of D. Our research shows that stocks with a Growth Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential. Hence, the stock does not look promising at present.
Choosing Favorable Foreign Banks
While Barclays doesn’t appear to be an attractive pick right now, there are a few other foreign bank stocks that have a better Zacks Rank and Growth Score. Also, these banks have outperformed the industry’s rally so far this year.
With the help of the Zacks Stock Screener, we have zeroed in on three foreign banks with a Growth Score of A or B and a Zacks Rank #1 or 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
HSBC Holdings plc HSBC, based in London, U.K., sports a Zacks Rank #1 and has a Growth Score of A. The bank’s current-year earnings are expected grow 212.2% year over year. Further, shares of the company have jumped 22.5% year to date.
Banco Santander, S.A. SAN, headquartered in Madrid, Spain, has a Zacks Rank #2 and Growth Score of B. Its earnings for 2017 are expected to increase 21.1%. Also, shares of the company have jumped 31.1% so far this year.
Brussels, Belgium-based KBC Group NV KBCSY has a Zacks Rank #2 and Growth Score of A. Further, the company’s 2017 earnings are projected to grow at the rate of 13.1% from the prior year. So far this year, the company’s shares have increased 35.1%.
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Barclays PLC (BCS) : Free Stock Analysis Report
Banco Santander, S.A. (SAN) : Free Stock Analysis Report
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