It seems to be a wise decision to add Fifth Third Bancorp FITB stock to your portfolio now, given the company’s efforts to improve efficiency and boost revenue growth through several initiatives, including the North Star initiatives. Also, its organic growth, aided by rising loans and deposits, bode well for the future.
Per management, Fifth Third is in the middle of executing its expense-reduction actions, which will generate annual efficiencies of $200 million, beginning 2021, with an additional $100-$150 million of annual efficiencies to be generated beginning 2022.
Also, Fifth Third’s encouraging capital-deployment activities reflect a strong balance-sheet position. Further, the company has a decent earnings surprise history. It surpassed the Zacks Consensus Estimate in two of the trailing four quarters for as many misses.
The company’s Zacks Consensus Estimate for 2020 and 2021 earnings has been revised upward over the last 30 days. Hence, the stock sports a Zacks Rank #1 (Strong Buy).
Furthermore, shares of the company have gained 46.9% in six months’ time compared with 22.6% growth recorded by the industry.
There are a number of other aspects, which make the stock an attractive investment option.
5 Factors That Make Fifth Third an Attractive Buy
Organic Growth: Fifth Third’s diverse revenue base will likely support its earnings growth. The company has expanded its non-interest income base, which now represents more than 38% of total revenues in the first nine months of 2020. Additionally, the company is focused on executing measures, including branch consolidation. Also, the company is focused on strategic investments through the North Star initiatives and MB Financial’s buyout, which are expected to aid revenue growth, expense savings and operational excellence.
Earnings Strength: Fifth Third recorded an earnings growth rate of 9% over the last three to five years. Furthermore, earnings are expected to display an upswing in the near term, as the company’s projected EPS growth (3-5 years) is 8.25%. Additionally, Fifth Third recorded an average earnings surprise of 2.28%, over the preceding four quarters.
Steady Capital Deployment: Fifth Third’s capital-deployment activities are impressive. The company raised its quarterly common stock dividend by 12.5% this February. Notably, following the 2020 stress test, the company maintained the dividend level as before and will be keeping share repurchases suspended in the fourth quarter of 2020 as well.
Strong Leverage: Fifth Third’s debt/equity ratio is 0.73, compared with the industry average of 0.79, displaying a lower debt burden relative to the industry. It highlights the company’s financial stability even in an unstable economic environment.
Stock seems undervalued: With respect to the price/cash flow and price-earnings (F1) ratios, Fifth Third seems undervalued. It has a P/CF ratio of 7.22 and a P/E ratio of 13.71, both of which are below the respective industry average of 7.51 and 14.07.
Other Stocks to Consider
Evercore Inc EVR has witnessed upward earnings estimate revisions for 2020 in the past 30 days. Moreover, this Zacks #1 Ranked stock has gained 40.4% in three months’ time. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cowen Group, Inc.’s COWN current-year earnings estimate moved north in 30 days’ time. Further, the company’s shares have appreciated 33.8% over the past three months. At present, it holds a Zacks Rank of 2 (Buy).
Interactive Brokers Group, Inc. IBKR has witnessed upward earnings estimate revision for the ongoing year in the past 30 days. This Zacks #2 Ranked stock has gained 4.2% in the past three months.
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