S&P 500 financial stocks are turning into real moneymakers — just ask Warren Buffett. But if you missed out, you might still have a shot to make bank.
Nine large and regional banks in the S&P 500, including Citigroup (C), KeyCorp (KEY) and Regions Financial (RF), will be worth at least 15% more in 12 months than they are now, analysts say. That’s based on an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Why care about financial stocks now? For one, the financial sector is already one of the best in the S&P 500 this year. But more importantly, financials are reporting their second-quarter profits now.
And they’re likely to be like money in the bank.
S&P 500 Financial Profits: Prepare To Be Amazed
S&P 500 profit growth reports will already be off the hook in the second quarter. But financials are seen doing even better. And investors will get real numbers this week.
Analysts are calling for S&P 500 financials to report nearly 120% profit growth in the second quarter, says John Butters, earnings analyst with FactSet. That’s roughly double the 64% jump analysts think is coming in second quarter profit for the S&P 500 (the best in a decade).
And within financials, banks are the top contributor, Butters says. If you took out the banks, S&P 500 financials’ profit would only rise by 55% in the quarter, or half of the growth with banks included.
Meanwhile, analysts continue to warm up to the S&P 500 financial sector, too. In just three months, analysts boosted their forecast for second-quarter profit by 11.5% to $69.8 billion. That’s among the top profit forecast increases among all the sectors, Butters says.
And S&P 500 investors are taking note. The Financial Select Sector SPDR (XLF) is up 24.4% this year. That tops the SPDR S&P 500 ETF Trust’s (SPY) 16.5% rise this year. Investors already made more than $850 billion on S&P financial stocks this year.
But analysts still see opportunity.
Citi Is The S&P 500 Bank With Most Upside, Analysts Say
Citigroup is the S&P 500 bank analysts still think has the most room to run higher.
Shares of the New York-based money center bank are only up 10.9% this year so far, to 68.37. The bank also has new leadership, adding to the uncertainty. Nonetheless, analysts think Citi will be an 83.96 a share stock in 12 months. If that’s right, it would be more than 22% upside. Keep in mind, too, Citigroup also yields 2.9% — roughly double the S&P 500.
Much hinges on Citi’s second-quarter profit report, due out on July 14. Analysts think the bank will earn an adjusted $1.88 a share in the period, up more than 260%. And for the year, Citi’s profit is seen jumping more than 75% to $8.59 a share.
Big Hopes For Other S&P 500 Banks
Analysts aren’t just looking for bounce backs in lagging S&P 500 bank stocks like Citi, though. KeyCorp is a hot S&P 500 bank stock with more room to run.
Shares of the Cleveland-based bank are already up more than 22% this year to 20.07. But analysts still think KeyCorp will be trading at 24.04 a share in 12 months, for a jump of nearly 20%. Analysts, too, see huge profit growth. They’re calling for KeyCorp to make 54 cents a share in the second quarter, up more than 230% from the same period a year ago. KeyCorp reports on July 20.
Some of the other bank stocks, too, are already perking up. Four of the nine S&P 500 bank stocks with 15% or more upside also sport decent IBD Composite Ratings of 80 or better. This means their stock action and fundamentals outclass 80% of other stocks’.
Regions is a good example. The Birmingham, Ala.-based bank carries a Composite Rating of 86. That’s partially due to the stock’s S&P 500-beating 17.3% gain this year. But it’s also a reflection of profit growth. Analysts think Regions’ profit in the second quarter will hit $500 million. And this year, profit is seen more than doubling. Analysts think Regions has more than 17% of upside in the stock.
Keep in mind, though, Regions lost more than $200 million, or 23 cents a share, in the same period a year ago. The bank’s second-quarter profit report is due out in mid-July.
But with S&P 500 banks kicking off profit reporting season, it won’t be long now until investors see how strong profits really are.
Analysts’ Favorite S&P 500 Bank Stocks
Those with most implied upside to 52-week price targets
|Company||Ticker||YTD % ch.||Implied upside to target||IBD Composite Rating|
|Fifth Third Bancorp||(FITB)||36.3%||16.4%||84|
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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