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 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 – Get Rating), Flushing Financial Corporation (FFIC – Get Rating), and Enterprise Bancorp, Inc. (EBTC – Get Rating). All three names have recently been upgraded to Buy in our proprietary POWR Ratings system.
American Express Company (AXP – Get Rating)
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 – Get Rating)
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…
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