CIT Group CIT is well poised for growth, supported by its inorganic expansion efforts, improving economy and steady demand for finance across various industries. Also, its capital deployment plan seems impressive. Hence, the stock is worth betting on at present.
The stock has been witnessing upward estimate revisions, reflecting analysts’ optimism about its earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for earnings has been revised marginally upward for both 2019 and 2020. The stock currently carries a Zacks Rank #2 (Buy).
The stock rallied 19.3% in 2019, underperforming the industry’s growth of 23.9%. Though the company’s price performance doesn’t seem to be too impressive, this reflects a significant rebound from a disappointing show in 2018, when the stock lost 22.3%.
Price Performance in 2019
What Makes CIT Group an Attractive Investment Option
Restructuring efforts: CIT Group has been successful in restructuring its business with a goal to simplify operations and become a regional commercial banking institution. Additionally, the company is undertaking efforts to diversify revenues. In sync with this, it announced the expansion of investment management and advisory capabilities. Further, in January 2020, the company acquired Mutual of Omaha Bank, which is expected to be accretive to its earnings over the next three years.
Revenue strength: CIT Group’s revenues witnessed a CAGR of 8.4% over the last five years (2014-2018). In fact, the trend is expected to continue in the near term as can be seen from its projected sales growth rate of 1.4% for 2020.
Earnings growth: CIT Group witnessed earnings growth of nearly 9.3% in the past three-five years. This momentum is likely to continue in the near term as reflected by its projected earnings growth rate of 23.8% for 2019 and 2.5% for 2020.
Further, the company’s long-term (three to five years) estimated earnings growth rate of 10% promises rewards for investors in the long run.
Impressive capital deployment: In April 2019, CIT Group increased its quarterly dividend by 40%. Also, in January 2019, it received nod to repurchase up to $450 million of common stock through Sep 30, 2019. These actions follow its exemption from the Federal Reserve’s annual stress tests. The company is well positioned to deploy capital meaningfully, given its lower dividend payout ratio compared with the industry average, and a strong balance sheet position.
Stock looks undervalued: If we compare CIT Group’s price-to-book (P/B) and price-to-earnings (F1) ratios with the respective industry averages, the stock appears undervalued. Its P/B and P/E ratios are 0.75 and 8.83 compared with the respective industry averages of 1.35 and 11.31.
Also, the stock currently has a Value Score of A. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount.
Other Key Picks
Over the past 60 days, Hilltop Holdings HTH witnessed an upward earnings estimate revision of 14.2% for 2019. Its share price has surged 39.8% in 2019. The stock carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings estimates of State Street Corporation STT for 2019 have been revised marginally upward over the past 60 days. Its shares have jumped 25.4% in 2019. The stock carries a Zacks Rank #2.
Over the past 60 days, Invesco Ltd.’s IVZ fiscal 2019 earnings estimates have moved 1.2% north. Shares of this Zacks Rank #2 company have rallied 7.4% in 2019.
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State Street Corporation (STT) : Free Stock Analysis Report
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