The Zacks Analyst Blog Highlights: KeyCorp., BofI Holding, Fifth Third Bancorp, Wells Fargo and Iron Mountain
CHICAGO, Dec. 16, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the KeyCorp. (NYSE:KEY-Free Report), BofI Holding, Inc. (Nasdaq:BOFI-Free Report), Fifth Third Bancorp (Nasdaq:FITB-Free Report), Wells Fargo & Company (NYSE:WFC-Free Report) and Iron Mountain (NYSE:IRM-Free Report).
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Here are highlights from Friday's Analyst Blog:
A Good Time to Invest in KeyCorp?
KeyCorp.'s (NYSE:KEY-Free Report) efficient expense control, along with steady capital deployment activities, places it well ahead of its peers. The stock closed at $13.08 on Dec 12, reflecting a strong year-to-date return of 51.9%. Going forward, with consistent improvement in the credit quality and strong capital ratios, there are fair chances of price appreciation. Therefore, continuing to hold the company's shares in your portfolio should be rewarding.
However, given the tepid economic recovery, stringent regulatory restrictions and the prevailing low interest-rate scenario, we discourage further addition of its shares to your portfolio.
Justifying the Stance
KeyCorp' third-quarter 2013 earnings per share of 28 cents came in ahead of the Zacks Consensus Estimate and the year-ago quarter figure of 22 cents. Results were primarily driven by growth in net interest income, partially offset by lower non-interest income and a slight rise in operating expenses.
KeyCorp's expense reduction program – "Fit for Growth" – seems impressive. Notably, the company has already surpassed the slated expense reduction target of $200 million for 2013 in the third quarter itself.
Efficient capital deployment activities in the form of regular share purchases and dividend hikes continue to boost investors' confidence in the stock. Further, KeyCorp has also received the Federal Reserve's approval to utilize the net after tax cash gain of $72 million from the divesture of Victory Capital Management to buy back additional shares.
However, we expect the pressure on net interest margin (NIM) to persist in the near term due to the soft new loan demand. Further, market dislocations over the last couple of years have led to deterioration in the valuation of many of the asset categories in KeyCorp's balance sheet. Hence, stability of the balance sheet remains a major challenge for the company at this point.
In line with our analysis, the Zacks Consensus Estimate underwent no revision over the last 30 days. While the Zacks Consensus Estimate for 2013 was 94 cents, for 2014 it was $1.02. Hence, KeyCorp currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked banks include BofI Holding, Inc. (Nasdaq:BOFI-Free Report), Fifth Third Bancorp (Nasdaq:FITB-Free Report) and Wells Fargo & Company (NYSE:WFC-Free Report). While BofI Holding carries a Zacks Rank #1 (Strong Buy), Fifth Third and Wells Fargo have a Zacks Rank #2 (Buy).
Iron Mountain Downgraded to Strong Sell
On Dec 13, 2013, Zacks Investment Research downgraded Iron Mountain (NYSE:IRM-Free Report) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Iron Mountain's not-so-impressive third-quarter results, lowered outlook and uncertainty related to granting of the REIT status were the primary reasons behind the downgrade.
Although the company's adjusted earnings of 31 cents per share succeeded in beating the Zacks Consensus Estimate by a penny, revenues missed the consensus mark.
Revenues declined marginally (down 1.4%) from the year-ago quarter to $755.6 million. The decline resulted from lower storage rental revenues (down 2.4% year over year), which was offset to a certain extent by a 1.0% year-over-year increase in service revenues.
Adjusted OIBDA margin contracted 80 basis points (bps) on a year-over-year basis to 31.8% due to legal accruals and decline in revenues in the Service segment.
The lackluster result compelled Iron Mountain to revise the full-year 2013 revenue guidance range from $3.00 billion–$3.05 billion to $3.025 billion–$3.050 billion. Currently, the Zacks Consensus Estimate is pegged at $3.035 billion.
Management also revised down its adjusted OIBDA guidance from the earlier outlook of $900.0 million–$925.0 million to $905.0 million–$925.0 million. Iron Mountain now expects earnings in the range of $1.05–$1.14 per share for the full year.
Although the company's decision to convert to REIT to reduce the tax burden and increase shareholders' value are positives, costs related to conversion and fluctuations in recycled paper prices are major near-term headwinds.
Estimate Revisions
The Zacks Consensus Estimate for the fourth quarter of 2013 has declined 15.4% (4 cents) to 22 cents over the last 60 days.
The Zacks Consensus Estimate for 2013 decreased 1.8% (2 cents) to $1.09 per share over the last 60 days and that for 2014 dropped 14.1% (18 cents) to $1.10 over the same period.
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