Provident Financial Upped to Strong Buy - Analyst Blog

On Aug 3, Zacks Investment Research upgraded Provident Financial Services, Inc. (PFS) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Provident Financial has been witnessing rising earnings estimates on the back of strong second-quarter 2013 results. Moreover, this well-known banking and financial services provider delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 14.6%. The long-term expected earnings growth rate for this stock is 5%.

The company reported its second-quarter results on Jul 26 with earnings per share of 34 cents, beating the Zacks Consensus Estimate as well as prior-year quarter's earnings of 28 cents by 21.4%. Robust results for the reported quarter were primarily aided by elevated non-interest income and substantial reduction in provision for loan losses.

Non-interest income increased 35.5% to $12.6 million, primarily aided by growth in fee income and net gains on securities transactions. Credit quality continues to exhibit an improvement for Provident Financial. Provision for loan losses was $1.0 million compared with $3.5 million in the prior-year quarter. Nonperforming loans were $88.8 million, down 10.4% year over year.

However, on the downside, net interest income declined 2.2% year over year to $53.4 million. Net interest margin was 3.29%, down 4 basis points as compared with the year-ago quarter. Non-interest expense surged slightly from the year-ago period to $37.8 million.

Following second-quarter 2013 results, the Zacks Consensus Estimate for 2013 increased 6.3% to $1.19 per share on the back of upward revisions in all 4 estimates over the last 30 days. For 2014, the Zacks Consensus Estimate advanced 0.8% to $1.19 per share with 3 of the 4 estimates moving north over the same time period.

Other Stocks to Consider

Besides Provident Financial, other stocks with a Zacks Rank #1 include Provident Financial Holdings, Inc. (PROV), Pulaski Financial Corp. (PULB) and Banner Corp. (BANR).