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5 Reasons Why Zions (ZION) Stock is a Good Investment Bet
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Given the rising interest rates and decent loan demand, Zions Bancorporation (ZION - Free Report) appears to be a solid bet. Further, the company’s efficient capital deployment activities enhance shareholder value.
Analysts seem to be bullish about the company’s earnings potential. The Zacks Consensus Estimate for 2022 and 2023 earnings has been revised 2.6% and 5.9% upward, respectively, over the past 30 days. Zions currently sports a Zacks Rank #1 (Strong Buy).
Looking at its price performance, shares of the company have rallied almost 1% over the past year against an 8.4% fall recorded by the industry.
Image Source: Zacks Investment Research
Here’s Why Zions is a Must Buy Now
Earnings growth: Zions witnessed earnings growth of 15.4% in the past three to five years, higher than the industry average of 10%. While the company’s earnings are projected to decline 11.9% for 2022, the same is expected to witness growth of 17.4% for 2023.
Also, the company has an impressive earnings surprise history. Zions’ earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average surprise being 2.95%.
Revenue strength: Zions’ revenues witnessed a compound annual growth rate (CAGR) of 2.8% in the last five years (2017-2021), driven by a robust loan balance, with net loans and leases (net of unearned income and fees) recording a CAGR of 3.2% over the same time frame. The bank's high non-interest-bearing deposits balance also aids its financials. With favorable macroeconomic developments, rising interest rates and continued demand for loans, the bank is likely to witness a further increase in revenues.
Zions’ revenues are projected to grow 6.9% for 2022 and 12% for next year.
Manageable debt level: As of Jun 30, 2022, the company had total borrowed funds of $1.69 billion and the cash and cash equivalents balance was $559 million. Its times-interest-earned ratio of 43.1 at the end of the second quarter 2022 reflects a year-over-year rise.
The company also maintains investment-grade ratings of BBB+ from both S&P Global and Fitch Ratings and Baa1 from Moody’s Investor Service. All three rating agencies have given a stable outlook to the company’s ratings. This provides the company with easy access to the debt market. Thus, given the earnings strength, Zions is likely to be able to continue to meet debt obligations, even if the economic situation worsens.
Steady Capital Deployment: In July 2022, the company announced an 8% hike in the quarterly dividend to 41 cents per share. The bank has a dividend yield of 2.85% and a five-year annualized dividend growth of 18.42%. At present, ZION's payout ratio is 28% of earnings.
The company has a share repurchase program in place as well. For the third quarter of 2022, Zions has authorized the buyback of up to $50 million. Given its robust capital position and lower dividend payout ratio compared with peers, the company is expected to sustain its capital deployments.
Stock Seems Undervalued: With respect to its current PEG and price/earnings (P/E) (F1) ratios, Zions looks undervalued. The company’s PEG ratio of 0.57 is below the industry average of 1.83. Also, the P/E ratio of the company is 9.35 compared with the industry average of 10.06.
Also, ZION has a Value Score of B. The Value Style Score condenses all valuation metrics into one actionable score, which helps investors steer clear of 'value traps' and identify stocks that are truly trading at a discount.
Over the past year, shares of East West Bancorp have gained 1.2%, while that of Associated Banc-Corp have rallied 1.3%.
Over the past 30 days, the Zacks Consensus Estimate for East West Bancorp’s current-year earnings has been revised 7.9% upward, while the same for Associated Banc-Corp has moved 12.1% north.
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5 Reasons Why Zions (ZION) Stock is a Good Investment Bet
Given the rising interest rates and decent loan demand, Zions Bancorporation (ZION - Free Report) appears to be a solid bet. Further, the company’s efficient capital deployment activities enhance shareholder value.
Analysts seem to be bullish about the company’s earnings potential. The Zacks Consensus Estimate for 2022 and 2023 earnings has been revised 2.6% and 5.9% upward, respectively, over the past 30 days. Zions currently sports a Zacks Rank #1 (Strong Buy).
Looking at its price performance, shares of the company have rallied almost 1% over the past year against an 8.4% fall recorded by the industry.
Image Source: Zacks Investment Research
Here’s Why Zions is a Must Buy Now
Earnings growth: Zions witnessed earnings growth of 15.4% in the past three to five years, higher than the industry average of 10%. While the company’s earnings are projected to decline 11.9% for 2022, the same is expected to witness growth of 17.4% for 2023.
Also, the company has an impressive earnings surprise history. Zions’ earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average surprise being 2.95%.
Revenue strength: Zions’ revenues witnessed a compound annual growth rate (CAGR) of 2.8% in the last five years (2017-2021), driven by a robust loan balance, with net loans and leases (net of unearned income and fees) recording a CAGR of 3.2% over the same time frame. The bank's high non-interest-bearing deposits balance also aids its financials. With favorable macroeconomic developments, rising interest rates and continued demand for loans, the bank is likely to witness a further increase in revenues.
Zions’ revenues are projected to grow 6.9% for 2022 and 12% for next year.
Manageable debt level: As of Jun 30, 2022, the company had total borrowed funds of $1.69 billion and the cash and cash equivalents balance was $559 million. Its times-interest-earned ratio of 43.1 at the end of the second quarter 2022 reflects a year-over-year rise.
The company also maintains investment-grade ratings of BBB+ from both S&P Global and Fitch Ratings and Baa1 from Moody’s Investor Service. All three rating agencies have given a stable outlook to the company’s ratings. This provides the company with easy access to the debt market. Thus, given the earnings strength, Zions is likely to be able to continue to meet debt obligations, even if the economic situation worsens.
Steady Capital Deployment: In July 2022, the company announced an 8% hike in the quarterly dividend to 41 cents per share. The bank has a dividend yield of 2.85% and a five-year annualized dividend growth of 18.42%. At present, ZION's payout ratio is 28% of earnings.
The company has a share repurchase program in place as well. For the third quarter of 2022, Zions has authorized the buyback of up to $50 million. Given its robust capital position and lower dividend payout ratio compared with peers, the company is expected to sustain its capital deployments.
Stock Seems Undervalued: With respect to its current PEG and price/earnings (P/E) (F1) ratios, Zions looks undervalued. The company’s PEG ratio of 0.57 is below the industry average of 1.83. Also, the P/E ratio of the company is 9.35 compared with the industry average of 10.06.
Also, ZION has a Value Score of B. The Value Style Score condenses all valuation metrics into one actionable score, which helps investors steer clear of 'value traps' and identify stocks that are truly trading at a discount.
Other Stocks Worth a Look
A couple of other top-ranked stocks from the banking space are East West Bancorp (EWBC - Free Report) and Associated Banc-Corp (ASB - Free Report) . At present, EWBC sports a Zacks Rank #1 (Strong Buy), while ASB has a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past year, shares of East West Bancorp have gained 1.2%, while that of Associated Banc-Corp have rallied 1.3%.
Over the past 30 days, the Zacks Consensus Estimate for East West Bancorp’s current-year earnings has been revised 7.9% upward, while the same for Associated Banc-Corp has moved 12.1% north.