KBW Impressed With Bank Of The Ozarks' Q2, Maintains Outperform

Keefe, Bruyette & Woods reiterated its Outperform rating on Bank Of The Ozarks Inc OZRK, saying the stock will remain one of the few regional banks capable of delivering double-digit EPS and TBV growth regardless of the rate environment.

Bank Of The Ozarks said its earnings per common share for the second quarter of 2016 were $0.60, a 17.6 percent increase from $0.51 for the second quarter of 2015. Street was expecting earnings of $0.59 a share.

"We view 2Q16 as a good quarter with an improved outlook for growth, strong credit metrics, and a NIM slightly ahead of our estimate," analyst Catherine Mealor wrote in a note.

"We believe the shares should continue to enjoy a squeeze (nearly 25% short interest) as OZRK continues to deliver strong fundamentals, double-digit TBV and EPS growth -- even in a lower for longer rate scenario," Mealor continued.

The analyst raised her 2016 EPS estimate by $0.02 to $2.40, maintained her 2017 EPS estimate of $2.85 and established a 2018 EPS estimate of $3.10.

"Importantly, even with 35 bps in NIM compression from current levels, an almost doubling of the provision, and the added costs of crossing $10 billion, we still believe OZRK can deliver double-digit EPS and TBV growth and maintain profitability at a level superior to the industry (1.6% ROA / 16% ROTCE / 4.45% NIM bottom and mid 30's efficiency)," Mealor noted.

In addition, the analyst continues to believe that over time, fundamentals (namely growth and credit) will remain sound, and additional M&A could be a positive catalyst.

At time of writing, shares rose 2.98 percent to $40.38. The analyst has a target price of $46.