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Here's Why Central Pacific (CPF) Stock is Worth Betting on
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Central Pacific Financial Corp. (CPF - Free Report) is well-positioned for growth given the continued emphasis on balance sheet optimization, strong liquidity and capital base. Moreover, a decent loan pipeline and swap initiatives are likely to offer further support.
Analysts are also optimistic about the stock’s earnings growth potential. Over the past 60 days, the Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1% and 5.4% upward, respectively. CPF currently carries a Zacks Rank #2 (Buy).
Over the past six months, shares of Central Pacific have gained 9.1% compared with the industry’s growth of 1.1%.
Image Source: Zacks Investment Research
Let’s dive deeper into the reasons that make CPF stock a lucrative bet now.
Earnings Growth: Central Pacific witnessed earnings growth of 8.58% over the past three to five years. This was driven by stabilized top-line and prudent expense management.
Also, the company has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, the average beat being 3.41%.
Moreover, the company’s healthy loan pipeline, improving Hawaii market outlook and efforts to boost operating efficiency are likely to keep the earnings strength solid going forward.
The Zacks Consensus Estimate for earnings indicates a 7.83% decline in 2024, with a subsequent recovery of 17.5% in 2025.
Revenue Strength: Driven by continued growth in non-interest income, Central Pacific’s revenues witnessed a compound annual growth rate (CAGR) of 3.3% over the last four years (2019-2023). Revenues declined in the first quarter of 2024 mainly because of lower net interest income. Further, interest rate swaps are likely to be accretive to net interest income while mitigating the interest rate risk. This, along with organic growth measures and a healthy loan pipeline, is likely to aid top-line expansion in the near future. Net loans and total deposits witnessed a CAGR of 5.1% and 7.5%, respectively, over the last four years ended 2023. The trend reversed for both metrics in the first quarter of 2024.
Further, the strategic move to reposition the balance sheet and utilize excess liquidity to pay down high-cost deposits is likely to be accretive to its net interest margin. Additionally, Central Financial’s deposit cost remains well below the peer average, thus, mitigating funding cost strains to some extent.
Though the Zacks Consensus Estimate for revenues indicates a 2.4% dip in 2024, it will grow at the rate of 5.5% in 2025.
Strong Balance Sheet: As of Mar 31, 2024, CPF’s total cash and cash equivalents (comprising cash and due from financial institutions and Interest-bearing deposits in other financial institutions) were $312.9 million and total debt (comprising accrued expenses and other liabilities and lease liabilities) was $127.8 million.
Further, tier 1 risk-based capital ratio and total risk-based capital ratio were pegged at 12.6% and 14.8% as of the same date, well above regulatory requirements of 6% and 8%, respectively. Thus, enabling the company to withstand any economic deterioration and absorb losses.
Stock Seems Undervalued: CPF stock has a Value Score of A. 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.
The Zacks Consensus Estimate for OBK’s current-year earnings has been revised 9.1% upward over the past 60 days. Shares of the company have lost 5.7% in the past six months.
The Zacks Consensus Estimate for TCBX’s 2024 earnings have been revised 10.7% upward over the past 60 days. Over the past six months, shares of the company have gained 16.1%.
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Here's Why Central Pacific (CPF) Stock is Worth Betting on
Central Pacific Financial Corp. (CPF - Free Report) is well-positioned for growth given the continued emphasis on balance sheet optimization, strong liquidity and capital base. Moreover, a decent loan pipeline and swap initiatives are likely to offer further support.
Analysts are also optimistic about the stock’s earnings growth potential. Over the past 60 days, the Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1% and 5.4% upward, respectively. CPF currently carries a Zacks Rank #2 (Buy).
Over the past six months, shares of Central Pacific have gained 9.1% compared with the industry’s growth of 1.1%.
Image Source: Zacks Investment Research
Let’s dive deeper into the reasons that make CPF stock a lucrative bet now.
Earnings Growth: Central Pacific witnessed earnings growth of 8.58% over the past three to five years. This was driven by stabilized top-line and prudent expense management.
Also, the company has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, the average beat being 3.41%.
Moreover, the company’s healthy loan pipeline, improving Hawaii market outlook and efforts to boost operating efficiency are likely to keep the earnings strength solid going forward.
The Zacks Consensus Estimate for earnings indicates a 7.83% decline in 2024, with a subsequent recovery of 17.5% in 2025.
Revenue Strength: Driven by continued growth in non-interest income, Central Pacific’s revenues witnessed a compound annual growth rate (CAGR) of 3.3% over the last four years (2019-2023). Revenues declined in the first quarter of 2024 mainly because of lower net interest income. Further, interest rate swaps are likely to be accretive to net interest income while mitigating the interest rate risk. This, along with organic growth measures and a healthy loan pipeline, is likely to aid top-line expansion in the near future. Net loans and total deposits witnessed a CAGR of 5.1% and 7.5%, respectively, over the last four years ended 2023. The trend reversed for both metrics in the first quarter of 2024.
Further, the strategic move to reposition the balance sheet and utilize excess liquidity to pay down high-cost deposits is likely to be accretive to its net interest margin. Additionally, Central Financial’s deposit cost remains well below the peer average, thus, mitigating funding cost strains to some extent.
Though the Zacks Consensus Estimate for revenues indicates a 2.4% dip in 2024, it will grow at the rate of 5.5% in 2025.
Strong Balance Sheet: As of Mar 31, 2024, CPF’s total cash and cash equivalents (comprising cash and due from financial institutions and Interest-bearing deposits in other financial institutions) were $312.9 million and total debt (comprising accrued expenses and other liabilities and lease liabilities) was $127.8 million.
Further, tier 1 risk-based capital ratio and total risk-based capital ratio were pegged at 12.6% and 14.8% as of the same date, well above regulatory requirements of 6% and 8%, respectively. Thus, enabling the company to withstand any economic deterioration and absorb losses.
Stock Seems Undervalued: CPF stock has a Value Score of A. 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.
Other Stocks to Consider
Some other top-ranked stocks from the banking space worth a look are Origin Bancorp, Inc. (OBK - Free Report) and Third Coast Bancshares, Inc. (TCBX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for OBK’s current-year earnings has been revised 9.1% upward over the past 60 days. Shares of the company have lost 5.7% in the past six months.
The Zacks Consensus Estimate for TCBX’s 2024 earnings have been revised 10.7% upward over the past 60 days. Over the past six months, shares of the company have gained 16.1%.