Chemical Financial Corporation
) announced impressive second quarter results in late July, which
included an earnings surprise of 16.3%. This regional bank has now
outperformed the Zacks Consensus Estimate in 11 of the last 14
quarters with an average beat of 24.9%.
This Zacks #1 Rank (Strong Buy) stock hit its 52-week high on
September 14, and has experienced strong estimate revisions over
the last 60 days. Moreover, it pays a regular quarterly dividend
that yields a sturdy 3.50%.
Solid Q2 Results
On July 23, Chemical Financial reported second quarter 2012
earnings of 50 cents per share, outpacing the Zacks Consensus
Estimate of 43 cents by 16.3% and beating last year's 40 cents by
25.0%. The improvement was led by top line growth and a lower
provision for loan losses, partially offset by higher operating
Net interest income climbed 2.5% year over year to $46.4 million.
Non-interest income increased 22.0% to $13.3 million. Moreover, net
interest margin expanded 2 basis points to 3.80%. However,
non-interest expenses escalated 6.3% to $35.5 million over the same
period on the back of higher compensation expenses.
Credit quality continued to improve at Chemical Financial. The
provision for loan losses was $4.0 million, down 42.9% from the
year-ago quarter, with net loan charge-offs also exhibiting a
declining trend. Net loan charge-offs amounted to $5.1 million,
down 26.1% from $6.9 million in the prior-year quarter.
Surge in Earnings Momentum
Over the last 60 days, the Zacks Consensus Estimate for 2012
increased 9.4% to $1.87 per share. For 2013, the Zacks Consensus
Estimate improved 4.3% to $1.94 over the same time frame.
The estimates reflect year over year improvements of about 18.8%
for 2012 and 4.2% for 2013.
Chemical Financial is one of the few banks that maintained regular
dividend payments throughout the financial crisis. In August, the
company announced a dividend hike of 5.0%. Currently, the company
pays a quarterly dividend of 21 cents per share, affirming a yield
Shares of Chemical Financial currently trade at 12.9x its 12-month
forward earnings, a 7% premium to the peer group average of 12.1x.
Its price to book ratio of 1.1 is at an 8% discount to the industry
median of 1.2. The company has a trailing 12-month ROE of 8.5%
compared with the peer group average of 9.6%.
Chart Shows Strength
The stock has remained mostly above the S&P 500 over the past
Chemical Financial is one of the few banks with rising estimates, a
robust dividend yield and reasonable valuation. With a steady
dividend payment and improving credit quality, it offers attractive
Headquartered in Midland, Michigan, Chemical Financial is a
diversified financial services company, which operates through a
single subsidiary bank, Chemical Bank. The company has 142 banking
offices spread over 32 counties in the lower peninsula of Michigan.
With a market capitalization of $660.2 million, Chemical Financial
competes with Citizens Republic Bancorp Inc. (
) and 1st Source Corporation (
), among others.
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