The shares of financial companies slumped last year with reduced financial transactions amid an economic slowdown and ultra-low interest rates. While benchmark interest rates remain at the same low level, the sector has been witnessing a solid recovery this year on the back of rebounding economic activities and increasing financial transactions.
Adding to the positives, the Federal Reserve has signaled two interest rate hikes as soon as late 2023, a year earlier than anticipated, which should bode well for the financial sector. The sector is further expected to grow with the ongoing global, digital transformation and investment in big data analytics. According to The Business Research Company, the global financial services market is expected to grow at a 6% CAGR from 2020 - 2025.
Investors’ interest in the financial sector is evident in the Financial Select Sector SPDR ETF’s (XLF) 26% gains over the past six months compared to the SPDR S&P 500 ETF Trust’s (SPY) 14.9% returns. Keeping these factors in mind, we think it could be wise to bet now on fundamentally sound financial stocks American Express Company (AXP), Flushing Financial Corporation (FFIC), and Enterprise Bancorp, Inc. (EBTC). All three names have recently been upgraded to Buy in our proprietary POWR Ratings system.
American Express Company (AXP)
AXP provides charge and credit payment card products and travel-related services worldwide. The New York City company operates through three segments: Global Consumer Services Group, Global Commercial Services, and Global Merchant and Network Services. The company’s products and services include payment and financing, network services and travel and lifestyle services.
Kabbage, an AXP subsidiary, launched Kabbage Checking on June 14, 2021. It is the first business checking account offered by AXP as a part of its broader integrated cash-flow management platform built for U.S. small businesses. This offering could further expand the company’s portfolio of services.
AXP’s expenses decreased 7% year-over-year to $6.75 billion for the first quarter, ended March 31, 2021. Its pre-tax income grew 562.2% year-over-year to $2.99 billion, while its net income increased 509% year-over-year to $2.23 billion. Also, its EPS came in at $2.74, up 568.3% year-over-year.
For the current quarter, ending June 30, 2021, analysts expect AXP’s EPS and revenue to increase 424.1% and 15.4%, respectively, year-over-year to $1.52 and $ 9.41 billion. APX surpassed consensus EPS estimates in three of the trailing four quarters. The stock has gained 66.8% over the past nine months to close yesterday’s trading session at $164.78.
It’s no surprise that AXP has an overall B rating, which equates to Buy in our POWR Ratings system. The stock was upgraded from Neutral to Buy on June 25, 2021. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Momentum and Sentiment. Click here to see AXP’s ratings for Growth, Value, Stability, and Quality also.
AXP is ranked #14 of 51 stocks in the B-rated Consumer Financial Services industry.
Flushing Financial Corporation (FFIC)
FFIC, which is based in Lake Success, N.Y., operates as the bank holding company for Flushing Bank and provides banking products and services primarily to consumers, businesses, and governmental units. It offers various deposit products, including checking and savings accounts, money market accounts, demand accounts, NOW accounts and certificates of deposit.
On April 27, 2021, John R. Buran, the company’s President and CEO said, “We are optimistic that as more people receive vaccines, local economic activity will improve. The recent steepening of the yield curve is a positive for us and we expect to capitalize on our robust loan pipeline. We continue to make investments in our technology platform and fintech partnerships, both of which are driving digital engagement.”
FFIC’s net interest income increased 49.2% year-over-year to $60.90 million for the first quarter, ended March 31, 2021. Its income before income taxes grew 576.2% sequentially to $26.22 million. Its net income increased 450.1% sequentially to $19.04 million. Also, its EPS came in at $0.60, up 445.4% sequentially.
Analysts expect FFIC’s EPS to come in at $0.65 for the current quarter, ending June 30, 2021, which represents an 80.6% year-over-year increase. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 30.4% in its fiscal year 2021 to $259.46 million. The stock has surged 101.8% over the past nine months to close yesterday’s trading session at $21.61.
FFIC’s POWR Ratings reflects this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. FFIC was upgraded from Neutral to Buy on June 25, 2021.
The stock has a B grade for Value, Stability, and Sentiment. Within the B-rated Northeast Regional Banks industry, FFIC is ranked #16 of 71 stocks.
To see all the additional POWR Ratings for FFIC (Growth, Momentum, and Quality), click here.
Enterprise Bancorp, Inc. (EBTC)
EBTC conducts all its operations through Enterprise Bank and Trust Company. It offers a range of commercial and consumer loan products, deposit products and cash management services. In addition, it offers investment advisory and wealth management, trust and insurance services. EBTC is based in Lowell, Mass.
Founder and Chairman of EBTC’s Board, George Duncan, commented on April 22 that “We remain steadfastly committed to our long-term focus of serving our customers, building relationships, investing in our future, cultivating our digital evolution, expanding our market area, and further developing our services and products.”
EBTC’s non-GAAP total core assets increased 5.7% sequentially to $3.77 billion for the first quarter, ended March 31, 2021. Its interest and dividend income grew 6.2% year-over-year to $37.11 million, while its net income increased 157.7% year-over-year to $10.35 million. Its EPS came in at $0.86, up 152.9% year-over-year.
The stock has soared 58.9% over the past nine months and 29.2% over the past six months to close yesterday’s trading session at $32.83.
EBTC’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which translates to Buy in our proprietary ratings system. The stock was upgraded from Neutral to Buy on June 28, 2021. It has an A grade for Stability, and a B grade for Sentiment.
Click here, to see more of EBTC’s component grades (Quality, Growth, Value, and Momentum). EBTC is ranked #17 in the Northeast Regional Banks industry.
AXP shares were trading at $163.47 per share on Tuesday morning, down $1.31 (-0.79%). Year-to-date, AXP has gained 36.08%, versus a 15.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.3 Upgraded Financial Stocks to Add to Your Portfolio appeared first on StockNews.com