Radian Group Inc. (RDN) | Daily Alert January 21
While Radian Group Inc. (RDN) may sound like a tech stock, the company is a leading provider of private mortgage insurance and risk-management solutions to lenders. The company also offers title services and real estate brokerage solutions.
At the end of September, primary insurance-in-force totaled $237 billion, up 9% from a year earlier. Radian is benefiting from robust mortgage originations, particularly from first-time buyers.
The company boasts an Overall score of 98, reflecting scores above 90 for Momentum and Financial Strength. The Value score is 88, placing Radian among the cheapest 12% of U.S.-traded stocks.
Radian offers excellent operating momentum, highlighted by accelerating revenue growth, healthy cash-flow trends, and 10 straight quarters of double-digit growth in per-share profits.
Operating cash flow increased 9% in the 12 months ended September, while free cash flow rose 9% to $664 million. For 2019, per-share earnings are expected to advance 16% to $3.11.
For 2020, the consensus is $3.21 per share, up from the $3.16 expected two months ago. The stock trades at eight times trailing earnings, below its five-year norm of 11, the industry median of 14, and the sector median of 13. We are starting coverage of Radian as Buy.
Richard J. Moroney, CFA, Upside, www.upsidestocks.com, 800-233-5922, January 6, 2020
M&T Bank Corporation (MTB) | Daily Alert February 7
M&T Bank Corporation (MTB) is a bank holding company headquartered in Buffalo, NY, that offers retail and commercial banking, trust and wealth management, and investment services through two operating subsidiaries, M&T Bank and Wilmington Trust, National Association, to clients primarily located in the Mid-Atlantic and Northeast.
The company’s Business Banking segment offers deposits, business loans and leases, and credit cards, and cash management, payroll, and letters of credit services to small businesses and professionals. Its Commercial Banking segment provides credit and banking services for middle-market and large commercial customers.
MTB’s Commercial Real Estate segment offers multifamily residential and commercial real estate credit, and deposit services. Its Discretionary Portfolio segment provides deposits; securities, residential real estate loans, and other assets; and short and long term borrowed funds, as well as foreign exchange services.
MTB’s Residential Mortgage Banking segment offers residential real estate loans for consumers and sells those loans in the secondary market; and purchases servicing rights to loans originated by other entities. Its Retail Banking segment offers demand, savings, and time accounts; consumer installment loans, automobile and recreational finance loans, home equity loans and lines of credit, and credit cards; demand, savings; and time accounts; mutual funds and annuities; and other services. The company also provides trust and wealth management; fiduciary and custodial; investment management; and insurance agency services.
As of Q4 2019 MTB had 750 domestic banking offices in New York State, Maryland, New Jersey, Pennsylvania, Delaware, Connecticut, Virginia, and the District of Columbia; a full-service commercial banking office in Ontario, Canada; and an office in George Town, Cayman Islands.
Kelley Wright, IQ Trends, https://iqtrends.com/, firstname.lastname@example.org, 866.927.5250, First-February 2020
Raymond James Financial, Inc. (RJF) | Daily Alert February 14
We are reiterating our BUY rating on Focus List selection Raymond James Financial Inc. (RJF), a provider of diversified financial services. The company reported solid fiscal 1Q20 EPS of $1.89, up from $1.69 a year earlier, driven by record revenues in the Private Client Group, Asset Management, and Raymond James Bank.
Looking ahead, we expect revenues to increase in the Private Client Group and Asset Management as net inflows continue to grow. We also look for an increase in net interest income
generated by Raymond James Bank. We expect the company to remain in expansion mode as it brings additional advisers to its platform and makes strategic acquisitions that fit within its
RJF organizes its businesses into four segments: Private Client Group, Capital Markets, Asset Management, and Raymond James Bank. We look at recent trends and outlooks for these segments below. Private Client Group net revenues of $1.41 billion (70% of net revenue) rose 4% year-over-year in 4Q, aided by record assets under administration in fee-based accounts.
Capital Markets net revenue rose 6% to $268 million (13% of net revenue), driven by increased revenue in fixed-income brokerage and underwriting in the debt and equity markets. Asset Management net revenue rose 6% to $184 million (8% of net revenue), reflecting net inflows and market appreciation.
At Raymond James Bank, net revenue rose 6% to $216 million (9% of net revenue), driven mainly by increased mortgage banking loan growth. Net loans rose 7% to $21.3 billion. The net interest margin decreased seven basis points to 3.23%. The loan loss provision fell to 1.01% from 1.10% in the prior-year quarter, and the percentage of nonperforming assets fell to 0.16% from 0.21% a year earlier.
We are maintaining our FY20 EPS estimate of $7.83 and our FY21 estimate of $8.00.
RJF shares are trading at 11.4-times our FY20 EPS estimate, below their historical average range of 12-14. However, we believe a higher multiple is warranted based on the company’s growth prospects. We think that investors will continue to focus on the company’s growth in assets under management, strategic acquisitions, and plans to expand the number of advisers.
Jim Kelleher, CFA, Argus Weekly Staff Report, www.argusresearch.com, 212-425-7500, January 2020
*UMB Financial Corporation (UMBF)
UMB Financial Corporation has annual revenue of $1.1 billion and a market capitalization of $3.3 billion and offers banking, asset management, health spending solutions, and related financial services.
For the fourth quarter, total revenue increased 10% to $283 million, and beat analyst expectations by nearly $5 million. Adjusted earnings-per-share of $1.36 also beat analyst expectations, by $0.19 per share.
As a smaller financial institution, UMB has greater flexibility to enter less competitive areas to generate future growth that the major U.S. banks may ignore. The company also has a long track record of producing reliable growth, including its 27- year streak of dividend increases.8
We expect 7% annual EPS growth for UMB through 2025. Based on 2020 expected earnings-per-share of $5.31, UMB stock currently trades for a price-to-earnings ratio of 12.8. This is below our fair value estimate, which is a price-to-earnings ratio of 14.5. As a result, the stock appears to be undervalued. The combination of valuation changes, 7% annual EPS growth, and the dividend yield results in expected annual returns of 11.3% over the next five years.
Ben Reynolds, Nick McCullum, Bob Ciura, Josh Arnold, and Samuel Smith, Sure Dividend Newsletter, www.suredividend.com, email@example.com, 800-531-0465, February 2020