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Loan Growth and Asset Quality Aid Washington Federal (WAFD)

Zacks Equity Research

Washington Federal, Inc. WAFD is well positioned to benefit from continued improvement in loan balances and impressive asset quality. Moreover, given a solid capital position, the company is expected to continue enhancing shareholder value through efficient capital deployment activities.

Also, its earnings estimates for fiscal 2019 have increased marginally over the past 60 days, reflecting that analysts are optimistic regarding its earnings growth potential. Thus, the stock currently carries a Zacks Rank #2 (Buy).

Washington Federal’s price performance also seems impressive. The company’s shares have gained 42.4% so far this year, outperforming the industry’s growth of 13.6%.






Looking at its fundamentals, its revenues witnessed a CAGR of 4.5% over the last five fiscal years (2014-2018), supported by continued growth in loans. Net loans have seen a CAGR of 8.4% over the same time frame. Given the rise in loan demand along with an improving economy, the company’s top line is expected to grow further.

Moreover, the company’s earnings strength and strong balance sheet position along with its trend of returning capital to shareholders should boost investors’ confidence in the stock.

Further, since fiscal 2010, the company’s credit costs have been declining. Notably, provision for loan losses reflected a reversal of $5.5 million in fiscal 2018 compared with an expense of $45.0 million in fiscal 2010. Thus, its credit quality continues to remain impressive and will hence aid financials.

However, relatively lower yields are expected to lead to decline in margins, which in turn is likely to hamper revenue growth to some extent. Additionally, mounting operating expenses (mainly due to higher compensation costs and information technology expenses) remains a major near-term concern for the company and will likely hamper bottom-line growth.

Other Stocks to Consider

A few other top-ranked stocks from the finance space are Ally Financial Inc. ALLY, Eaton Vance Corp. EV and Ameriprise Financial, Inc. AMP. All these stocks currently carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past 60 days, Ally Financial witnessed an upward earnings estimate revision of 2.7% for 2019. Its shares have gained 54.1% so far this year.

Eaton Vance has witnessed an upward earnings estimate revision of 1.8% for fiscal 2019 over the past 60 days. The company’s share price has increased 30.7% year to date.

Over the past 60 days, the Zacks Consensus Estimate for Ameriprise Financial’s current-year earnings has been revised 1% upward. Its shares have gained 40% so far this year.

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Washington Federal, Inc. (WAFD) : Free Stock Analysis Report
 
Ally Financial Inc. (ALLY) : Free Stock Analysis Report
 
Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report
 
Eaton Vance Corporation (EV) : Free Stock Analysis Report
 
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