Truist Financial Looks Oversold (TFC)
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- 14 Apr 2022
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Truist Financial (NYSE:TFC), the 6th largest U.S. bank by assets, is down 12.7% (not including dividends) over the past 12 months and 22.4% from its 12-month closing price of $67.41 on Jan. TFC has an overall 12-month return of -9.3%, compared to -5% for the SPDR S&P Bank ETF (KBE) and -2.6% for the Invesco KBW Bank ETF (KBWB). TFC will report Q1 earnings on April 19, 2022.
Even though rising interest rates from increased interest income bodes well for banks, the general consensus earnings outlook for TFCs is for lower earnings in 2022 than in 2021. Two sources of drag on expected income in 2022 (see slide 27) are mortgage reductions. -In related income and wealth management fees. The longer-term outlook is preferable, with the general consensus that annual EPS growth will be 10% p.a. over the next 3 to 5 years.
TFC has a dividend yield of 3.64% and a 3-year dividend growth rate of 5.93% p.a. However, the dividend for 2021 increased by only 3.3%.
One challenge in assessing the outlook for banks is to interpret the flattening (and even partially inverted) yield curve versus rising inflation and rising bond yields. An inverted yield curve has historically indicated a high probability of a recession. The recession is in line with a fall in inflation and, subsequently, lower bond yields.
I last wrote about TFC on February 2, 2021, at which time I assigned a buy rating. Wall Street’s consensus rating on TFC was bullish with a 12-month price target, which was 16.4% above the share price at the time. With a forward P/E of 12.1, TFC looked cheap. In addition to looking at fundamentals and the Wall Street consensus outlook, I analyzed options prices on the TFC to calculate a market-implied approach, a potential price return forecast that represents a consensus outlook between buyers and sellers of options. does. The market-implanted outlook was bullish for the next few months, turning neutral by mid-2022, and somewhat bearish in early 2022. I considered a strong bullish outlook from Wall Street consensus and a cheap valuation to outpace the marginally negative outlook. From the options market to the beginning of 2023 in my last assessment. In the period since my post, TFC has returned a total of 9% versus 17% for the S&P 500. Read More...
