4 Reasons Why KeyCorp (KEY) Stock Is An Attractive Pick Now

Improving operating backdrop and a rising rate environment, along with the strengthening of domestic economy, should keep supporting the performance of banking stocks. Also, renewed optimism related to lesser regulations with the passage of the Financial Choice Act positions the stocks well. Keeping these in mind, we have selected KeyCorp (NYSE:KEY) for you to consider.

The Cleveland, OH-based bank continues to reflect strength in several areas, such as rising loans and deposits, improving credit quality and a strong capital position. Driven by these positives, analysts seem to be optimistic about KeyCorp’s prospects. Over the last 60 days, the Zacks Consensus Estimate for 2017 and 2018 increased 2.2% and 1.9%, respectively.

Also, the Zacks Rank #2 (Buy) stock has surged 59.7% over the last one year, significantly outperforming the Zacks categorized Major Regional Banks industry’s rally of 38.1%.



Why is the Stock a Solid Choice?

Revenue Growth: Organic growth remains the key strength at KeyCorp. The company’s revenues have witnessed a five-year compound annual growth rate of 5.1% (2012–2016). A sustained growth in loans and rising interest rates as well as higher fee income should continue to aid top-line growth. Notably, projected revenue growth (F1/F0) currently stands at 23.5%.

Earnings Growth: KeyCorp witnessed earnings growth of 26% in the last three to five years. This earnings momentum is likely to continue in the near term as reflected by the company’s projected EPS growth rate (F1/F0) of 25.4% compared with the industry increase of 11.2%.

Further, the company’s long-term (three to five years) estimated EPS growth rate of 8% promises rewards for investors in the long run.

Focus on Cost Control: KeyCorp continues to reap benefits from its expense reduction program – Fit for Growth. The company has been streamlining operations, consolidating branches and exiting unprofitable/non-core businesses, leading to stable operating expenses in the quarters ahead. Also, it remains on track to achieve targeted cash efficiency ratio of less than 60%.

Impressive Capital Deployment Activities: Driven by its capital strength, KeyCorp’s capital deployment activities are impressive. In May, the company announced an 11.8% dividend hike (part of its 2016 capital plan) and it has a share buyback plan in place. Also, with the results of this year’s stress test coming out soon, the company should be able to deploy more capital, thereby rewarding its shareholders.

Other Stocks to Consider

Some other banking stocks worth a look include Comerica Incorporated (NYSE:CMA) , M&T Bank Corporation (NYSE:MTB) and Cullen/Frost Bankers, Inc. (NYSE:CFR) . All three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Comerica has witnessed a marginal upward earnings estimate revision for the current year, over the past 60 days. Also, over the last six months, its shares have gained 6.9%.

M&T Bank earnings estimates were revised 1.1% upward for the current year, in the past 60 days. Also, its shares increased 4.7% over the last six months.

Cullen/Frost Bankers recorded an upward earnings estimate revision of 3.5% for the current year, in the past 60 days. Also, its shares have seen a 10.4% rise over the last six months.

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Comerica Incorporated (CMA): Free Stock Analysis Report

M&T Bank Corporation (MTB): Free Stock Analysis Report

KeyCorp (KEY): Free Stock Analysis Report

Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis Report

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