Earnings estimates for
Bank of Montreal
(
BMO
) have been moving higher since this major Canadian bank posted
strong third quarter fiscal 2012 results, which included
year-over-year earnings growth of 9%. Moreover, Bank of Montreal
has delivered positive earnings surprises in three of the last four
quarters with an average beat of 3%.
This Zacks #2 Rank (Buy) company currently pays a dividend that
yields a solid 4.8%.
Third Quarter EPS Moves Higher
On August 28, Bank of Montreal reported third quarter fiscal 2012
adjusted earnings per share of $1.50, topping the Zacks Consensus
Estimate of $1.40 by 7% and the year-ago earnings of $1.38 by 9%.
The upsurge was mainly aided by growth in revenue and a lower
provision for credit losses.
Net interest income climbed 17% to $2.05 billion (C$2.01 billion).
Non-interest income was up 13% to $1.70 billion (C$1.67 billion).
However, the net interest margin contracted 8 basis points (bps) to
1.70%. Additionally, the company's non-interest expenses rose 20%
to $2.38 billion (C$2.34 billion) over the same period.
The provision for credit losses continued to improve at Bank of
Montreal, coming in at $118 million (C$116 million) in the quarter,
down 50% from the year-ago quarter.
Rising Earnings Estimate Revisions
The past 7 days have witnessed an escalation in all seven estimates
for fiscal 2012, pushing the Zacks Consensus Estimate up by 3% to
$5.76. For 2013, 6 out of 9 estimates moved north over the same
time frame, helping the Zacks Consensus Estimate advance 2% to
$6.07.
The Zacks Consensus Estimate for 2012 reflects a year-over-year
improvement of about 11%, while the Zacks Consensus Estimate for
2013 indicates year-over-year growth of 5%.
Dividend Payment
Bank of Montreal is one of the few banks that maintained regular
dividend payments throughout the financial crisis. The company also
increased its quarterly dividend from 69.5 cents per share to 73
cents in August 2012. Currently, the company pays a quarterly
dividend of 73 cents per share, equating to a yield of 4.8%.
Reasonable Valuation
The shares of Bank of Montreal currently trades at 10.2x 12-month
forward earnings, a slight premium to the peer group average of
10.1x. Its price to book ratio of 1.4 is in line with the industry
median. Moreover, the company has a trailing 12-month ROE of 14.1%,
in line with the peer group average.
The Bottom Line
Bank of Montreal is one of few commercial banks with rising
estimates, strong growth projections, a strong dividend yield and
reasonable valuation. Moreover, with dividend increases and
improving credit quality, it offers attractive upside potential.
Company Description
Headquartered in Montreal, Canada, Bank of Montreal provides
various banking products and services. The company was founded in
1817 and conducts business through 1,600 banking offices in Canada
and the United States. It has a market capital of $38 billion.
BANK MONTREAL (BMO): Free Stock Analysis Report
BANK MONTREAL (BMO): Free Stock Analysis Report
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