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5 Reasons to Make Fifth Third (FITB) Part of Your Portfolio

Zacks Equity Research
Updated

Fifth Third Bancorp FITB is a promising stock now due to its diligent efforts to enhance profitability through Project North Star initiatives. Also, the company’s organic and inorganic growth strategies make it well poised for future endeavors. Further, earnings growth prospects and favorable valuation make it an attractive pick.

Moreover, continual rise in interest rates and lower commercial tax rate are likely to further boost profitability of the bank.

Supporting this positive view, the Zacks Consensus Estimate for current-year earnings has been revised nearly 1% upward over the last 30 days. As a result, the stock carries a Zacks Rank #2 (Buy).

Further, shares of the company have gained around 15.7% in six months’ time, outperforming 4.5% growth recorded by the industry.

Why Fifth Third is a Must Buy

Impressive Initiatives: Fifth Third launched Project North Star, which focus on improving financials and revamping its profitability. The company expects to generate an annualized return on average tangible common equity (non-GAAP) in the range of 14% to 16%, a return on average assets between 1.35% and 1.45% and an efficiency ratio below 60% by the end of 2019.

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Acquisition Spree: Given its robust liquidity position, Fifth Third is well positioned to grow on the back of acquisitions. In February 2018, it acquired Coker Capital Advisors, a healthcare advisory company. Further, in February last year, the company acquired R.G. McGraw Insurance Agency, which provides property and casualty insurance as well as risk management analysis. Product and balance-sheet diversification, stemming from the acquisitions, will likely support the company’s top line.

Revenue Growth: Fifth Third’s diverse revenue base supports its efforts to make consistent progress toward driving performance. Over the past four years (ended 2017), total revenues recorded a compound annual growth rate (CAGR) of 5.9%.

Its projected revenue growth rate is 6.1% for 2018 (compared with the industry average of 4.7%).

Earnings Strength: Fifth Third recorded earnings growth rate of 2.34% over the last three to five years. Also, earnings are expected to display an upswing in the near term, as the company’s projected EPS growth (three to five years) is 7.9%. Also, Fifth Third recorded an average positive earnings surprise of 5.04%, over the trailing four quarters.

Stock is Undervalued: Fifth Third has P/CF and P/B ratios of 9.02 and 1.45 compared to the industry’s average of 11.79 and 1.49, respectively. Based on these ratios, the stock seems undervalued.

Other Stocks to Consider

Comerica Incorporated CMA has witnessed an upward estimate revision of nearly 1% in the last 60 days. Additionally, the stock has rallied more than 44% in the past year. It carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

M&T Bank Corporation’s MTB earnings estimates for the current year have been revised 1.3% upward over the last 60 days. Its shares have gained 23.5% in the past year. It carries a Zacks Rank of 2.

TCF Financial Corporation TCF witnessed slight upward earnings estimate revision for the current year, over the last 60 days. The company’s shares have soared around 41% in a year’s time. It also carries a Zacks Rank of 2.

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Comerica Incorporated (CMA) : Free Stock Analysis Report
 
M&T Bank Corporation (MTB) : Free Stock Analysis Report
 
Fifth Third Bancorp (FITB) : Free Stock Analysis Report
 
TCF Financial Corporation (TCF) : Free Stock Analysis Report
 
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