On Jun 30, 2014, we issued an updated research report on
Cullen/Frost Bankers, Inc.
). Driven by strong top-line performance, the company's
first-quarter 2014 earnings were encouraging. Impressive organic
growth, capital adequacy and expansion through recent acquisitions
were the driving factors behind the results.
Organic growth remains a key strength at Cullen/Frost, as reflected
in its revenues. Revenues grew at a CAGR of 2.7% over the last five
years (2009-2013). Moreover, net revenue increased 3.1% year over
year in first-quarter 2014. We believe that the company is well
positioned to maintain this trend going forward.
Cullen/Frost continues to expand through acquisitions. In May 2014,
in an attempt to increase its footprint in Texas, the company
completed the merger with WNB Bancshares, Inc. This marks the first
bank acquisition for Cullen/Frost since 2006 when it bought Fort
Worth-based Summit Bancshares Inc. The merger will enable
Cullen/Frost to reinforce its Texas franchise and enter the
profitable Midland and Odessa markets.
Moreover, with a sound balance sheet and capital position,
Cullen/Frost has a competitive advantage over other banks.
Additionally, backed by its strong liquidity position, Cullen/Frost
has been consistently paying dividends.
Nevertheless, with the growing level of non-interest expenses, the
company is exposed to operational risks. Notably, non-interest
expenses rose 1.3% year over year in first-quarter 2014.
For Cullen/Frost, the Zacks Consensus Estimate for 2014 and 2015
remained stable at $4.13 and 4.36, respectively, over the last 60
days. Hence, Cullen/Frost currently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked finance stocks include
Monarch Financial Holdings, Inc.
). All of these carry a Zacks Rank #2 (Buy).
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