Webster Financial Corporation WBS is a wise pick to add to your investment portfolio at present, backed by its acquisition-driven growth momentum, robust balance sheet, strong operating fundamentals and favorable rate backdrop.
Earnings estimates for the company have been witnessing upward revisions, reflecting analysts’ optimism regarding its earnings growth potential. Over the past month, the Zacks Consensus Estimate for WBS’ earnings has been revised marginally upward for 2022. The company currently carries a Zacks Rank #2 (Buy).
The stock has rallied 7.8% over the past six months against the industry’s fall of 5%.
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A few other factors, which make WBS an attractive investment option now, are mentioned below.
Earnings Growth: In the last three-five years, WBS’ earnings witnessed growth of 10.3%. In 2022 and 2023, the company’s earnings are projected to witness growth of 16.9% and 16.4%.
The company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 8.6%.
Revenue Strength: Webster Financial has an impressive revenue growth story. Net interest income (NII) and non-interest income witnessed a compounded annual growth rate (CAGR) of 3.1% and 5.7%, respectively, over the last five years (2017-2021), with some annual volatility. Both metrics witnessed rising trends in the first nine months of 2022.
Also, rising rates will aid revenue growth. Webster Financial’s merger deal with Sterling Bancorp has expanded selected commercial lending portfolios, HSA Bank and digital banking offerings. This has helped in the diversification and the unlocking of revenue-growth opportunities.
Roust Balance Sheet: WBS has a healthy balance-sheet position. Deposits saw a five-year (2017-2021) CAGR of 9.2%. The acquisitions of Bend Financial and Sterling Bancorp drove HSA deposits, increasing total deposits. Further, the company witnessed impressive loan growth in the same time span, witnessing a CAGR of 6.2%.
We believe deposit and loan balances, supporting the company’s strong capital position, are poised to grow further from an improving economic backdrop. Management expects fourth-quarter loan growth to be 2-3% sequentially, with continued loan demand in key segments.
Superior Return on Equity (ROE): WBS’ ROE is 12.09%, higher than the industry average of 11.94%. This indicates that the company reinvests its cash more efficiently than the industry.
Other Stocks to Consider
A couple of other bank stocks worth a look are Hancock Whitney Corporation HWC and F.N.B. Corporation FNB. At present, HWC and FNB carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Hancock Whitney’s 2022 earnings has moved marginally upward over the past 30 days. So far this year, HWC’s shares have gained 9.6%.
The Zacks Consensus Estimate for F.N.B. Corp’s 2022 has been unchanged over the past 30 days. FNB’s shares have rallied 16.2% in the year-to-date period.
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Webster Financial Corporation (WBS) : Free Stock Analysis Report
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