Earnings momentum for
Cardinal Financial Corp.
) has been advancing since this regional bank reported its sixth
straight quarterly beat in late October. Every earnings estimate
for the company has been revised higher in the past 60 days.
Moreover, this Zacks #1 Rank (Strong Buy) hit a new 52-week high on
December 20th, after announcing a dividend hike on December 10th.
With a robust year-to-date return of 53.3% and an expected
long-term earnings growth rate of 18%, this stock looks like a
solid momentum pick.
Cardinal Financial's third-quarter earnings of 48 cents per share
outpaced the Zacks Consensus Estimate by 54.8% and the year-ago
earnings by 65.5%. Solid top-line growth led to the strong results,
partially offset by a rise in operating expenses.
Net interest income surged 17.7% year over year to $23.7 million.
Likewise, non-interest income jumped 48.0% to $22.2 million,
primarily driven by huge increases in title insurance & other
income and loan fees. Non-interest expenses rose 17.7% to $22.3
million, mainly reflecting a 44.0% increase in salaries and
Asset quality continued to improve during the quarter. As of
September 30, 2012, total non-accrual loans fell 18.1% year over
year to $8.8 million. Likewise, the allowance for loan losses was
1.53% of loans receivable, down 7 basis points from the previous
year. Moreover, the provision for loan losses plummeted 48.0% from
the year-ago quarter to $1.5 million.
Hike in Dividend
On December 10, Cardinal Financial's board of directors enhanced
the first quarter 2013 common stock cash dividend by 25% to 5 cents
per share. The dividend will be paid on December 28 to shareholders
of record as of the close of business on December 17.
Earnings Momentum on an Upswing
All 9 earnings estimates for 2012 have advanced in the past 60
days, boosting the Zacks Consensus Estimate by 25.2% to $1.49. This
reflects a year-over-year improvement of 58.0%. For 2013 as well,
all 9 estimates moved north over the same time frame, helping the
Zacks Consensus Estimate advance 23.9% to $1.40.
Cardinal Financial currently trades at 11.0x 12-month forward
earnings, a 26% discount to the peer group average of 14.9x. Its
price to book ratio of 1.7 is at a 42% premium to the peer group
average of 1.2.
The company has a trailing 12-month ROE of 14.9%, compared with the
peer group average of 9.2%. This implies that the company reinvests
its earnings more efficiently than its peer group.
Chart Shows Strength
Cardinal Financial has witnessed strong price momentum since the
third quarter earnings release. Moreover, the company has been
continuously outperforming its 200-day moving average over the past
year. The year-to-date return for the stock is 53.3% compared with
the S&P 500's return of 13.7%.
Cardinal Financial provides various commercial and retail banking
products and services in northern Virginia and the greater
Washington D.C. area through 27 banking offices. Founded in 1997,
the company has a market cap of about $477.5 million. First
Community Bancshares, Inc. (Bluefield) (
) and Omniamerican Bancorp, Inc. (
) are the other Zacks #1 Rank (Strong Buy) stocks in the same
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