On Dec 26, we issued an updated research report on Washington Federal WAFD . The company is well positioned to benefit from continued improvement in loan balances and a rising rate scenario. Further, management believes that tax reform act will accelerate investments in technology upgrades. However, higher expenses and exposure to risky loan portfolios remain near-term threats.
While the company's earnings estimates for fiscal 2018 have remained stable in the last 30 days, it carries a Zacks Rank #2 (Buy).
Washington Federal's strong fundamentals have contributed to the 0.6% increase in its share price so far this year, against the industry 's decline of 0.8%.
Washington Federal is focused on its organic growth strategy. The company's revenues have witnessed a CAGR of 3.5% over the last four fiscal years (2014-2017). The uptrend is largely driven by improving net loan balance, which has seen a CAGR of 9.3%, over the same time frame. With improving loan demand and higher interest rates, the company's top-line growth will likely continue going forward.
Further, the company's earnings strength and strong balance sheet position, along with its trend of returning capital to shareholders, should boost investors' confidence in the stock. In April 2017, the company signed a definitive agreement to acquire Anchor Bancorp in an all-stock deal, which will be accretive to its earnings. Also, since fiscal 2011, the company has been increasing its dividend annually. The last hike was announced in January 2017. Further, the company has its share repurchase program in place.
Moreover, Washington Federal has been witnessing a rise in net interest margin (NIM). The company's NIM increased to 3.13% in fiscal 2017 from 3.11% in fiscal 2016 and 3.08% in fiscal 2015, driven by loan growth and rise in interest rates. Also, economic recovery, rising loan demand and higher interest rates are expected to lead to margin improvement in the quarters ahead.
However, mounting operating expenses pose a major challenge to Washington Federal. Over the last six fiscal years (2012-2017), expenses have witnessed a CAGR of 10.1%. Expenses are expected to continue rising in the quarters ahead owing to integration charges related to the Anchor Bancorp deal, branch acquisitions and continued investment in franchise.
Other Stocks to Consider
Some other stocks worth considering from the same space are First Bank FRBA and S&T Bancorp STBA , each sporting a Zacks Rank #1 (Strong Buy), and The First of Long Island Corporation FLIC carrying a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .
First Bank has seen the Zacks Consensus Estimate for current-year earnings being revised upward by 3.1% in the last 60 days. The company's share price has risen almost 18.9%, in the past six months.
The Zacks Consensus Estimate for S&T Bancorp's current-year earnings has remained stable in the last 60 days. Its share price has increased 11.2% in the past six months.
The First of Long Island Corporation's current-year earnings estimates have been revised 1.4% upward over the last 60 days. Also, its shares have climbed 4.4% in the past six months.
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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 report Washington Federal, Inc. (WAFD): Free Stock Analysis Report S&T Bancorp, Inc. (STBA): Free Stock Analysis Report The First of Long Island Corporation (FLIC): Free Stock Analysis Report First Bank (FRBA): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research