Earnings momentum for Oritani Financial Corp. (ORIT) has been on the rise since this regional bank reported solid fiscal first quarter results late last month, which included a positive earnings surprise. ORIT became a Zacks #1 Rank (Strong Buy) on October 30 and hit its 52 week high on November 1.
The company has now recorded positive earnings surprises in three of the last four quarters with an average beat of 12.8%. Moreover, Oritani Financial pays a regular quarterly dividend that yields a solid 4.2% annually.
Robust Q1 Results
On October 25, Oritani Financial reported fiscal first quarter earnings of 22 cents per share, outpacing the Zacks Consensus Estimate of 20 cents by 10.0% and the year-ago earnings of 15 cents by 46.7%. Results primarily benefited from improved net interest income and a dip in the provision for loan losses.
The company's net interest income rose 16.1% on a year-over-year basis to $24.2 million. Likewise, net interest margin jumped 36 basis points (bps) to 3.76%. Yet, other income fell 35.7% to $1.2 million, due to a lower net gain on sale of assets. Total other expenses soared 12.7% to $9.2 million.
Credit quality improved at Oritani Financial. Provision for loan losses plummeted 57.1% from the prior-year quarter to $1.5 million. Similarly, as of September 30, 2012, net charge offs were 0.04% of average loans outstanding, down 54 bps from the prior-year quarter.
Earnings Estimates Move Ahead
Over the past 30 days, the Zacks Consensus Estimate for fiscal 2013 advanced 6.3% to 84 cents per share, as all three estimates moved north. For fiscal 2014, the Zacks Consensus Estimate climbed 4.9% in the same time frame to 86 cents, as two of three estimates were revised upward.
The estimates reflect year-over-year improvements of about 20.5% for 2013 and 2.0% for 2014.
Oritani Financial hiked its dividend by 20% to 15 cents per share in April. The company has been consistently increasing its dividend payout; the latest increase marked its sixth since 2009. The current dividend rate affirms an annual yield of 4.2%.
Shares of Oritani Financial currently trade at 16.8x 12-month forward earnings, an 18% premium to the peer group average of 14.2x. Its price to book ratio of 1.2 is 20% above the industry median of 1.0. Given its strong fundamentals, the premium valuation looks justified.
Chart Shows Strength
The stock has been continuously trading above its 200-day moving average over the last six months.
With rising earnings estimates, strong growth projections, a sturdy dividend yield and reasonable valuation, Oritani Financial offers an attractive growth and income opportunity.
Oritani Financial is the holding company for Oritani Bank. The company, with 25 full service branches in the counties of Bergen, Hudson and Passaic in New Jersey, provides a wide range of retail and commercial loan and deposit products. The company has a market cap of about $651.8 million. Center Bancorp Inc. (CNBC) and Horizon Bancorp. (HBNC) are the other Zacks #1 Rank (Strong Buy) stocks in the same industry.
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