Chemical Financial Corp. - Growth & Income

By
A A A

Chemical Financial Corporation ( CHFC ) 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 expenses.

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.

Dividend Payment

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 of 3.50%.

Reasonable Valuation

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 year.

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 upside potential.

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. ( CRBC ) and 1st Source Corporation ( SRCE ), among others.


Want More of Our Best Recommendations?

Zacks' Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential .

Learn More>>



 
CHEMICAL FINL (CHFC): Free Stock Analysis Report
 
To read this article on Zacks.com click here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: CHFC

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

THE COST OF HOUSE FLIPPING
THE COST OF HOUSE FLIPPING          

Stocks

Referenced

100%

Most Active by Volume

83,946,369
  • $16.40 ▼ 1.20%
65,919,147
  • $102.99 ▲ 0.51%
63,004,409
  • $42 ▲ 4.53%
42,618,740
  • $7.93 ▼ 2.94%
41,388,613
  • $78.37 ▼ 0.41%
40,438,996
  • $3.81 ▲ 14.76%
39,835,674
  • $12.32 ▲ 2.41%
38,147,728
  • $12.83 ▼ 2.80%
As of 10/22/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com