Earnings estimates for
U.S. Bancorp
(
USB
) have been advancing since this major regional bank posted strong
second quarter results, which included year-over-year earnings
growth of 18.3%. The stock hit its 52-week high on July 19, 2012
and achieved a Zacks #2 Rank (Buy) on July 21. It currently enjoys
a decent dividend yield of 2.3%.
Second Quarter EPS Moves Higher
On July 18, U.S. Bancorp reported second quarter 2012 net earnings
per share of 71 cents, topping the Zacks Consensus Estimate of 69
cents by 2.9% and the year-ago earnings of 60 cents by 18.3%. The
upsurge was mainly aided by growth in revenue and a lower provision
for credit losses.
Net interest income climbed 6.6% to $2.7 billion. Non-interest
income increased 9.7% to $2.4 billion. However, net interest margin
contracted 9 basis points (bps) to 3.58%. Additionally, the
company's non-interest expenses escalated 7.3% to $2.6 billion over
the same period.
Credit metrics continued to improve at U.S. Bancorp. The provision
for credit losses was $470 million, down 17.8% from the year-ago
quarter with net charge-offs showing a declining trend. Net
charge-offs (excluding covered loans) were 1.04% of average loans
outstanding, down 59 bps year over year.
Rising Earnings Estimate Revisions
The past 7 days have seen 21 out of 27 estimates for 2012 move
higher, pushing the Zacks Consensus Estimate up by 2.2% to $2.81.
For 2013, eighteen out of 27 estimates moved north over the same
time frame, helping the Zacks Consensus Estimate advance 1.7% to
$3.02.
The Zacks Consensus Estimate for 2012 reflects a year-over-year
improvement of about 16.8%, while the Zacks Consensus Estimate for
2013 indicates a year-over-year growth of 7.1%.
Dividend Payment
U.S. Bancorp slashed its quarterly dividend from 42.5 cents per
share to 5 cents early in 2009. But it raised it to 12.5 cents in
early 2011. Moreover, the dividend was again hiked by 56% to 19.5
cents early this year.
Currently the company pays a quarterly dividend of 19.5 cents per
share, affirming a yield of 2.3%.
The stress test clearance justifies U.S. Bancorp's capital strength
and its solid business model. As a matter of fact, year-to-date,
the company has returned 62% of its earnings to shareholders, which
is within the range of its long-term goal of returning 60% to 80%
of earnings.
Reasonable Valuation
Shares of U.S. Bancorp currently trade at 11.9x 12-month forward
earnings, a 19% premium to the peer group average of 10.0x. Its
price to book ratio of 1.9 is also at a significant premium to the
industry median of 0.8. However, the company has a trailing
12-month ROE of 15.9% compared with the peer group average of 9.2%.
Chart Shows Strength
The stock has been consistently trading above its 200 days moving
average since December 2011.
U.S. Bancorp is one of the strongest banks with rising estimates,
strong growth projections, a decent dividend yield and reasonable
valuation. Moreover, with consecutive dividend increases and
improving credit quality, it offers attractive upside potential.
Headquartered in Minneapolis, Minnesota, U.S. Bancorp provides
various banking products and services. The company was founded in
1863 and conducts business through 3,085 banking offices and 5,053
ATMs. With a market capital of about $63.4 billion, U.S. Bancorp
competes with Wells Fargo & Company (
WFC
) among others.
US BANCORP (USB): Free Stock Analysis Report
To read this article on Zacks.com click here.