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Zions Bancorp(ZION-Q)

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Why Zions Bancorporation Stock Rose 20.6% This Week

Motley Fool - Fri Jul 21, 10:10AM CDT

What happened

Zions Bancorporation (NASDAQ: ZION) saw its share price rise 20.6% this week as of Friday at 10:00 a.m. ET, according to S&P Global Market Intelligence. It had risen as much as 24.3% this week. Its stock price is down about 24% year to date, trading at around $37 per share.

The broader markets plodded along this week, as the S&P 500 was only up 0.8%, while the Dow Jones Industrial Average was up 2%, and the Nasdaq Composite was flat as of Friday morning.

So what

Zions Bancorporation posted second-quarter earnings on Thursday that beat analysts' estimates. The bank posted net earnings of $166 million, down from $195 million last June 30, with earnings per share (EPS) at $1.11. That was ahead of the $1.08 EPS consensus estimate.

Revenue rose 1.9% to $780 million year over year, which was higher than the $750 million consensus estimate. Loans rose 9% year over year to $57 billion, while net interest income was flat at $591 million.

Deposits were down 6% year over year, but customer deposits were up 3% from the first quarter -- a good sign for the bank. Also, the net interest margin ticked up to 2.92% from 2.87% in the same quarter a year ago, despite costs of deposits rising to 1.27% from 0.03% a year ago.

"Second quarter operating results reflect a solid rebound in customer deposits over the past three months, but also a higher cost of funds, which reduced net interest income to levels comparable with those of a year ago," said Harris Simmons, chairman and CEO of Zions.

Now what

Zions' better-than-expected results prompted a slew of Wall Street analysts to bump up its price target, including Truists' Brandon King, who raised it to $42 per share. Investors should be relieved to see deposits growing and the bank's common equity tier 1 ratio rise to 10% from 9.9% last quarter.

With a dirt cheap price-to-earnings (P/E) ratio of 6.5 and a P/E-to-growth ratio of just 0.71, Zions is undervalued and a buy for those looking to add a solid regional bank name to their portfolio.

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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool recommends Truist Financial. The Motley Fool has a disclosure policy.

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