Markets
BAC

Banks' Q1 Earnings Shine: 3 Stock Picks - Analyst Blog

The Q1 earnings season has gotten off to a good start, powered by the financial sector. While other sectors have been hit by multiple headwinds, financials remain on a steady growth path. Major banks in particular have delivered stellar performances, with every big name posting impressive results.

Major Banks Impress

JPMorgan Chase & Co. JPM was the leader, setting the bar so high that none of its peers could beat its performance. The company posted earnings of $1.45 per share, beating the Zacks Consensus Estimate of $1.39. The company's operating expenses were down substantially, reflecting the success of its cost-saving initiatives.

Riding on higher revenues, Wells Fargo & Company WFC delivered a positive earnings surprise of 6% in first-quarter 2015. Citigroup Inc. C delivered a positive earnings surprise of 9.4% in first-quarter 2015.

U.S. Bancorp USB reported first-quarter 2015 earnings per share of 76 cents, in line with the Zacks Consensus Estimate. Bank of America Corporation's BAC first-quarter 2015 results also saw year-over-year improvement.

Initiatives and Challenges

The finance sector's better showing is largely a function of improvement in some business lines such as investment banking, trading, some gains in loan portfolios and better cost controls. However, the overall interest rate backdrop for the group remains challenging.

This is because net interest margin, the spread between the banks' lending and borrowing rates, has been under pressure for quite some time because of the unusually low treasury bond yields. With the Fed widely expected to delay hiking rates following soft economic data, this tough interest rate environment is likely to continue for some time.

On the positive side, banks will continue to benefit from increased mortgage activity as lower rates led to a jump in applications to refinance home loans. A revival in the housing sector on moderating home prices helped drive this surge. Reuters has also pointed toward the potential success of large banking corporations as higher bond trading and underwriting revenue might work in favor of these organizations.

Our Choices

Besides some of the big names, several other banks have posted encouraging results. Additionally, with our new style score system we have identified the key statistics to pay close attention to and thus which stocks might be the best for value investors in the near term. The Value Style 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 Style Scores of 'A' or 'B' when combined with a Zacks Rank #1 or #2, offer the best upside potential. Based upon the above criteria, we have selected three stocks that have posted impressive earnings numbers. Not only do these stocks have a favorable Zacks Rank but also a value score of 'A' or 'B.'

Wilshire Bancorp Inc.WIBC is the holding company of Wilshire State Bank, a California state-chartered bank with a mission to serve an overlooked multi-ethnic small business community. The company reported first-quarter 2015 earnings of 24 cents per share, beating the Zacks Consensus Estimate of 20 cents.

Wilshire Bancorp posted revenues of $52 million, ahead of the Zacks Consensus Estimate of $51 million.

Wilshire Bancorp holds a Zacks Rank #2 (Buy) and has a Value Style Score of 'A'. The company's projected earnings growth for this year is 12.7%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 11.99.

Wintrust Financial Corp.WTFC is a financial holding company which provides banking services including trust and investment services. The company reported first-quarter 2015 earnings of 76 cents per share, beating the Zacks Consensus Estimate of 74 cents.

Wintrust Financial posted revenues of $216 million, ahead of the Zacks Consensus Estimate of $212 million.

Wintrust Financial holds a Zacks Rank #2 (Buy) and has a Value Style Score of 'B'. The company has projected earnings growth of 8.5% and has a P/E (F1) of 15.07x.

Boston Private Financial Holdings, Inc.BPFH offers a full range of banking, commercial and residential lending, and trust and investment management services to its domestic and international clientele. The company reported first-quarter 2015 earnings of 21 cents per share, beating the Zacks Consensus Estimate of 18 cents.

Boston Private Financial posted revenues of $87 million, matching the Zacks Consensus Estimate.

Apart from a Zacks Rank #2 (Buy), Boston Private Financial has a Value Style Score of 'B'. It has an expected earnings growth of 8.7% and has a P/E (F1) of 15.31x.

Banks have posted encouraging performance in an otherwise challenging environment. They may even profit from a strong U.S. dollar, global growth worries and a slump in the energy sector. This is why these stocks would make for good additions to your portfolio.

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

JPMORGAN CHASE (JPM): Free Stock Analysis Report

US BANCORP (USB): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

CITIGROUP INC (C): Free Stock Analysis Report

BANK OF AMER CP (BAC): Free Stock Analysis Report

WINTRUST FINL (WTFC): Free Stock Analysis Report

BOSTON PRIV FIN (BPFH): Free Stock Analysis Report

WILSHIRE BCP (WIBC): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

BAC USB JPM WFC C

Other Topics

Earnings Stocks

Latest Markets Videos