Cullen/Frost Bankers ' CFR impressive revenue growth, and growing deposit and loan balances make it a promising pick right now. Moreover, strong capital position supports its capital deployment activities.
A positive trend in estimate revisions also reflects optimism on the company's earnings growth prospects. The Zacks Consensus Estimates for Cullen/Frost's fourth-quarter and 2017 earnings have moved up marginally over the last 60 days. As a result, the stock currently carries a Zacks Rank #2 (Buy).
Further, the stock has gained 8% over the past 12 months, widely outperforming the industry 's rally of 4.6%.
Why Cullen/Frost is a Good Bet
Earnings per Share Strength: Cullen/Frost recorded an earnings growth rate of 6.5% over the last three to five years compared with growth of 4.4% for the industry it belongs to. The company's earnings growth rate for 2018 is anticipated to be 7.1%.
Moreover, the long-term (three-five years) expected EPS growth of 9.5% promises rewards for its shareholders. The company also has an impressive earnings surprise history, outpacing the Zacks Consensus Estimate in all of the trailing four quarters. It delivered an average positive surprise of 4% for this period.
Revenue Growth: Organic growth remains a key strength at Cullen/Frost as reflected by its revenue growth story. Revenues witnessed a CAGR of 5.9% over the last five years (2012-2016), with the trend continuing in 2017. Further, the company's sales are projected to grow 5.1% in 2018.
Steady Capital Deployment: Cullen/Frost manages its capital levels efficiently. In April 2017, the company hiked its quarterly stock dividend by 5.6%. Notably, it has raised dividends annually for 24 consecutive years. Additionally, in October 2016, its board of directors approved a $150-million common stock repurchase program. This underlines the company's commitment to return value to shareholders.
Strong Leverage: Cullen/Frost's debt/equity ratio is valued at 0.08 compared with the industry's average of 0.47, thus displaying lower debt burden relative to the industry. This, in turn, reflects the company's relatively strong financial health, which will help it perform better than its peers under a dynamic business environment.
Superior Return on Equity (ROE): Cullen/Frost's ROE of 11.64% compared with the industry average of 10.13% reflects the company's commendable position over its peers.
Stock is Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of "value traps" and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B when combined with a favorable rank - a Zacks Rank #1 (Strong Buy) or 2 - offer the best upside potential.
In fact, the stock looks undervalued in terms of price-to-earnings and price-to-cash flow ratios. The company's trailing 12-month P/E and P/CF ratios of 16.50 and 13.86, respectively, are below the industry averages of 16.92 and 16.16.
Other Stocks to Consider
Some other top-ranked stocks in the finance space are Capital City Bank Group CCBG , First Bancorp FBNC and Carolina Financial Corporation CARO .
Capital City Bank's consensus estimate has been revised 2.3% upward for 2017 over the last 60 days. In the past 12 months, the company's share price has been up 14.7%. It currently sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .
First Bancorp has a Zacks Rank #2. Its earnings estimate for 2017 have been revised 3% upward over the last 60 days. The stock has risen 32.3% in the past 12 months.
Carolina Financial also has a Zacks Rank of 2. Its 2017 earnings estimate has been revised 1% upward over the last 60 days. The company's shares have rallied nearly 23.3% in the past 12 months.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportCapital City Bank Group (CCBG): Free Stock Analysis ReportCarolina Financial Corporation (CARO): Free Stock Analysis ReportFirst Bancorp (FBNC): Free Stock Analysis ReportCullen/Frost Bankers, Inc. (CFR): Free Stock Analysis ReportTo read this article on Zacks.com click here.