On a day when Netflix disappointed analysts and investors alike because of lower-than-expected subscriber adds (both actual and forecast for Q2) finance stocks continued to shine.
And it wasn’t just the writing back of loan loss reserves either. Companies really did well overall, growing both top and bottom lines, on the back of increasing deposits, higher loan balances, better efficiency and growing net interest income (for the most part). The refinancing of term loans and elevated prepayments did impact a few players however.
Here are 4 stocks that caught my attention-
Interactive Brokers Group, Inc. IBKR reported revenue (up 37.0% year over year) and earnings (up 42.0%) that were 8.8% and 8.9% above the respective Zacks Consensus Estimates.
In a continuation of a trend that started soon after the pandemic first hit, customer trading volumes continued to rise the world over, becoming the biggest driver of the business in the last quarter.
As a result, commission revenue jumped 53%. Net interest income also increased 19%. Brexit-related regulatory onboarding pushed up G&A.
Going into the announcement, the Zacks Rank #2 (Buy) company was expected to grow revenue and earnings 9.0% and 16.5%, respectively in 2021 and growth was expected to continue in the following year. These results should take estimates higher.
The company specializes in routing orders, besides executing and processing trades in securities, futures, foreign exchange instruments, bonds and mutual funds on more than 135 electronic exchanges and market centers worldwide.
United Community Banks, Inc. UCBI reported revenue and earnings that jumped 22.9% and 102.4%, respectively from last year. These results were also ahead of the respective Zacks Consensus Estimates by 1.1% and 27.7%.
While organic loan growth improved and transaction deposits even more so, the reversal of loan loss reserves was the primary reason for the outperformance on the bottom line. Net interest was hit by increased liquidity.
Overall conditions remain positive, helped by the stimulus, increased liquidity of businesses and individuals and pent-up demand that should lead to continued strength in the following quarters.
The Zacks Rank #2 company was expected to report revenue and earnings growth of 4.3% and 20.2% this year. After the strong quarter, these estimates could prove conservative.
The holding company operates through community-focused branches, each of which offers a range of retail and corporate banking services, including checking, savings and time deposit accounts, secured and unsecured loans, wire transfers, brokerage services and other financial services.
Synovus Financial Corp. SNV reported year-over-year revenue and earnings growth of 1.7% and 476.2%, respectively while topping the respective Zacks Consensus Estimates by 0.6% and 30.1%.
Commercial and industrial loans picked up strongly (although below historical levels) with respect to the prior year even as commercial real estate remained relatively sluggish while consumer declined. Deposits grew strongly across categories.
Continued fixed-rate repricing and accelerated prepayment activity depressed net interest income but lower deposit costs, deployment of excess liquidity and reversal of loan loss reserves were offsetting factors.
The revenue outlook for this Zacks Rank #2 company didn’t look so hot going into the announcement (expected decline of 5.2% this year followed by 1.3% growth in the next), investors clearly expected better, sending the shares down after the announcement. However, efficiency gains and loan loss reversals will likely continue, supporting upward revisions to the earnings estimate that’s currently expected to be up 52.7% this year and 5.5% in the next.
The company provides integrated financial services, including commercial and retail banking, financial management, insurance, and mortgage services to its customers through locally branded divisions of its wholly owned subsidiary bank, Synovus Bank, by offices located in Georgia, Alabama, South Carolina, Florida and Tennessee.
Forestar Group Inc. FOR, a leading national residential lot developer, reported revenue and earnings growth of 80.5% and 195.0%, respectively. The numbers were 0.5% and 43.9% above the respective Zacks Consensus Estimates.
The housing shortage is driving strength in the residential construction market, which in turn is driving demand for residential plots. This strength is likely to continue beyond the current year, making this an extremely attractive segment to invest in.
Revenue from development projects (87% revenue share) jumped 154.7% from last year while lot banking (10% revenue share) dropped 48.6%. Average sales price per lot was down 2.0%. Other sales grew 155.6%.
Around 63% of owned plots are under contract to sell or subject to a right of first offer to D.R. Horton, one of the leading homebuilders. Lots sold to other builders jumped from 45 in the year-ago quarter to 230 in the just-concluded one.
Total lots at quarter-end were up 62% from a year ago.
The Zacks Rank #2 company was expected to grow revenue and earnings at a respective 29.8% and 44.6% in the current fiscal year ending in September but these estimates could be in for an upward revision.
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