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Regions Financial (RF) Up 18% QTD: Is Further Upside Left?

Shares of Regions Financial Corporation RF have gained 18% in the quarter-to-date period. Also, the stock has outperformed the S&P 500 and industry growth of 11.7% and 16.3%, respectively, in the same period.

Regions Financial’s shares rallied 35.2% in 2021 despite the near-zero interest rate environment and disruption of business activities due to the COVID-19 pandemic.

RF put up a robust performance on higher loans and deposit balances. Also, the company keeps focusing on inorganic activities, which diversify product offerings.

Quarter-to-Date Price Performance

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Moreover, analysts are optimistic regarding this Zacks Rank #2 (Buy) stock’s prospects. Over the past 30 days, the Zacks Consensus Estimate for RF’s 2022 & 2023 earnings has been revised 4.9% & 2.5% upward, respectively.

There are certain factors that will keep aiding Regions Financial’s persistent price appreciation. Let’s discuss those in detail.

Organic Growth: The company has always been committed to its plan for revenue growth. Further, RF has been witnessing solid loan growth, which saw a five-year CAGR of 2.4% (ended 2021).

Furthermore, RF’s asset-sensitive position will benefit from the rising interest rate environment. Management expects the net interest income for 2022 will grow 16-18%.  Also, 2022 revenues are projected to be up 7.5-8.5%.

For 2022, the company is expected to witness revenue growth of 8.6% while for 2023 it is anticipated to rise 7.6%.

Inorganic Initiatives: Regions Financial concentrates on expanding and diversifying its operation. In 2021, the company acquired Clearsight, Sabal Capital and EnterBank USA. These deals will diversify its product offerings and strengthen its fee income base. Given its strong balance sheet and liquidity position, the company will likely continue undertaking such endeavors.

Earnings Strength: RF witnessed earnings growth of 17.7% compared with the industry’s rise of 13.6% in the past three to five years. While earnings are projected to decline 6.8% for 2022, it is likely to rebound next year and grow 5.9%. RF’s long-term (3-5 years) projected earnings growth of 29.9% promises rewards for investors.

Strong Liquidity Position: The company possessed substantial cash and cash equivalent balances of $20.5 billion as of Jun 30, 2022. Also, long-term borrowings of $2.3 billion (as of the same date) have declined over the past few quarters. We believe that Regions Financial is less likely to default on interest and debt repayments if the economic scenario deteriorates. In fact, its senior unsecured debt enjoyed an investment-grade credit rating of BBB+ from both Standard & Poor’s, and Fitch. This enables the company to get access to the debt market.

Moreover, RF has impressive capital deployment plans. In July 2022, the company announced an 18% increase in its quarterly dividend to 20 cents per share. Also, it has a share buyback authorization plan. Under the program, it is authorized to repurchase up to $2.5 billion of common stock from second-quarter 2022 through the fourth quarter of 2024.

Thus, RF’s capital deployment activities seem sustainable, which will enhance shareholder value.

Other Stocks to Consider

A couple of other top-ranked stocks from the banking space are Capital City Bank Group, Inc. CCBG and First BanCorp. FBP. Both CCBG and FBP sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Capital City Bank Group’s Zacks Consensus Estimate for 2022 earnings has moved 11% upward over the past 60 days. In the past three months, CCBG’s shares have gained 27%.

First BanCorp’s Zacks Consensus Estimate for 2022 earnings has been revised 7.4% upward over the past 30 days. FBP’s shares have gained 10.9% in the past three months.


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Regions Financial Corporation (RF) : Free Stock Analysis Report
 
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