Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Margin Pressure, High Costs Hurt Bank OZK: Time To Sell?

By Zacks Investment ResearchStock MarketsMar 24, 2020 09:52PM ET
www.investing.com/analysis/margin-pressure-high-costs-hurt-bank-ozk-time-to-sell-200518921
Margin Pressure, High Costs Hurt Bank OZK: Time To Sell?
By Zacks Investment Research   |  Mar 24, 2020 09:52PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Bank OZK’s (NASDAQ:OZK) profitability will likely be hurt due to continuously increasing expenses. Moreover, a decline in interest rates is expected to hamper top-line growth to an extent in the near term.

The Zacks Consensus Estimate for the company’s current-year earnings has been revised 7.6% downward over the past 30 days, reflecting analysts’ pessimism regarding its earnings growth potential. As a result, the stock currently carries a Zacks Rank #4 (Sell).

Bank OZK’s price performance is also not encouraging. Its shares have lost 42% so far this year compared with a 47.4% decline recorded by the industry it belongs to. While most of the decline is primarily due to fears regarding the impact of the coronavirus outbreak along with expectations of an economic recession, the negative estimate revisions indicate that the stock has limited upside potential.






Looking at fundamentals, the company’s net interest margin (NIM) has been persistently declining over the past eight years from 5.91% in 2012 to 4.34% in 2019. Moreover, the recent decline in interest rates to near-zero amid the Federal Reserve’s accommodative policy stance, margin pressure is likely to persist in the near term.

Further, Bank OZK’s expenses have been continuously increasing over the past few years. Over the last six years (2014-2019), expenses witnessed a CAGR of 19.3% mainly due to an increase in salaries and employee benefits costs. As the company is expanding into newer areas organically as well as through acquisitions, costs are expected to remain elevated. For 2020, management anticipates non-interest expenses to increase in high-single-digit percentage on a year-over-year basis.

Bank OZK’s substantial exposure to real estate loans makes us apprehensive. The company’s exposure to these loans was almost 73% of total loans as of Dec 31, 2019. Significant exposure to risky loans might hamper financials.

Nevertheless, driven by rise in loans and the company's inorganic growth efforts, revenues are likely to continue improving. Also, its efficient capital-deployment activities indicate a strong balance sheet.

Stocks Worth Considering

Virtu Financial, Inc.’s (NASDAQ:VIRT) Zacks Consensus Estimate for current-year earnings has been revised upward by 34% over the past 60 days. The company currently sports a Zacks Rank #1 (Strong Buy).

Metropolitan Bank Holding Corp. (NYSE:MCB) has witnessed an upward earnings estimate revision of 5.5% for the current year over the past 60 days. At present, the company flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for earnings of Focus Financial Partners Inc. (NASDAQ:FOCS) has been revised 3.2% upward for the current year over the past 60 days. The company currently carries a Zacks Rank #2 (Buy).

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>



Virtu Financial, Inc. (VIRT): Free Stock Analysis Report

Metropolitan Bank Holding Corp. (MCB): Free Stock Analysis Report

Bank OZK (OZK): Free Stock Analysis Report

Focus Financial Partners Inc. (FOCS): Free Stock Analysis Report

Original post

Zacks Investment Research
Margin Pressure, High Costs Hurt Bank OZK: Time To Sell?
 

Related Articles

Michele Schneider
Is Stagflation Creeping up? By Michele Schneider - Jun 20, 2021 1

After Wednesday’s Fed announcement, the stock market has been sitting in an uneasy state. The U.S dollar—Invesco DB US Dollar Index Bullish Fund (NYSE:UUP) not only firmed, but...

Margin Pressure, High Costs Hurt Bank OZK: Time To Sell?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email