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U.S. Bancorp (USB) Rallies 10.3% YTD: Is More Upside Left?

Zacks Equity Research

The finance sector has been exhibiting a stellar performance, of late, with some monthly volatility. The United States’ economic health, on which this sector is largely dependent, has displayed steady improvement with increasing real GDP numbers, declining unemployment rate, improving consumer spending and a stabilizing housing market.

Additionally, economic growth is likely to be robust in the near term, while at the same time, trade tensions might jeopardize the uptrend.

Riding on higher rates and improved lending margins, along with lesser regulations under the Trump administration, the finance sector has emerged triumphant. Therefore, financial stocks have performed decently to register positive gains, year to date.

One such stock is U.S. Bancorp USB, which has rallied 10.3% year to date.

U.S. Bancorp Price

U.S. Bancorp Price

U.S. Bancorp price | U.S. Bancorp Quote

Furthermore, with the improved macroeconomic environment and the company’s accomplishment of its core strategies, for second-quarter 2019, management expects fully-taxable equivalent net interest income to increase in low single-digits, year over year, and fee revenues to be up in low single-digits, including the negative impact of the ATM business’ sale. Moreover, the company’s strategic initiatives, including expansion moves, are anticipated to bolster revenue growth.

Additionally, the Zacks Consensus Estimate for this Zacks Rank #3 (Hold) stock’s 2019 earnings remained unrevised, over the last 30 days, while the same has been revised slightly upward for 2020.

U.S. Bancorp’s ROE of 15.53%, compared with the industry average of 12.69%, indicates the company’s commendable position over its peers.

U.S. Bancorp’s earnings have increased 6.23% annually over the last three to five years. The earnings growth momentum is anticipated to continue in the near term as well. The company’s projected EPS (earnings per share) growth (F1/F0) is 4.63% for 2019 and (F2/F1) nearly 6% for 2020.

Additionally, U.S. Bancorp has recorded remarkable growth in average loans and deposits over the past few years, as it continued to expand and deepen relationships with current customers, as well as acquire new customers and market share. Notably, the company’s average deposits and loans reflected five-year CAGR of 5.8% and 3.8%, respectively, in 2018. The increasing trend continued in this year’s January-March quarter as well.

Further, U.S. Bancorp has an impressive capital-deployment plan on the back of its solid capital position. Following the approval of its 2018 capital plan, the company increased its quarterly dividend by 23.3% last September. The approved plan also includes share-repurchase programs of up to $3 billion for the four-quarter period, which began Jul 1, 2018. Notably, U.S. Bancorp returned 77% of its earnings to shareholders through dividends and share repurchases as of Mar 31, 2019, within the targeted payout ratio of 60-80%.

Stocks to Consider

First Business Financial Services, Inc. FBIZ, currently flaunting a Zacks Rank #1 (Strong Buy), has been witnessing upward estimate revisions, for the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Franklin Resources, Inc. BEN has been witnessing upward estimate revisions, for the past 60 days. At present, it sports a Zacks Rank of 1.

1st Source Corporation SRCE has been witnessing upward estimate revisions for the past 60 days. It currently carries a Zacks Rank #2 (Buy).

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