Banking, finance, and taxes

Oppenheimer Positive on Banks Into Earnings: 4 to Buy Now

Lee Jackson

Published: July 13, 2018 7:35 am

Last Updated: January 11, 2020 9:05 pm

After a sparkling 2017, many of the top bank and financial institution stocks have sputtered in 2018, and with the economy improving and the prospects for interest rates to go higher, the sector may be offering investors some of the best opportunities. Another positive for the industry has been tax reform, which appears to be helping to improve credit quality, which is a huge metric for financial institutions as they are often the lenders of first choice for consumers.

Oppenheimer is out with a new report with its thoughts on the banks and financial institutions in the firm’s coverage universe, and with some of the top stocks showing some second-quarter positives, the analyst is cautiously optimistic into earnings and noted this:

While we wouldn’t advocate just indiscriminately buying the names, we do think there are stories where the fundamentals/profitability are improving, and as the year progresses these stocks should continue to outperform

These four companies are the analyst’s favorites and shares of all are rated Overweight.

Ally Financial

This is the old financing arm of GM that was known before the Great Recession as GMAC. Ally Financial Inc. (NYSE: ALLY) is a leading auto lender and a top 25 U.S. financial holding company. Its businesses include one of the largest full service auto finance operations in the country, a growing online bank, a wealth management and online brokerage platform and a corporate finance business.

The company reported solid first-quarter numbers, and those results featured strong credit results as well. While deposit costs could be rising, and the company did show some net interest margin compression, that is expected to improve in the second quarter.

Shareholders receive a 1.9% dividend. The Oppenheimer price target for the stock is $34, and the Wall Street consensus target is $33.20. Shares closed on Thursday at $27.34.

American Express

This stock has bounced back nicely from the intense selling early this year and offers good upside. American Express Co. (NYSE: AXP) provides charge and credit payment card products and travel-related services to consumers and businesses worldwide.

The company’s products and services include charge and credit card products; payments and expense management products and services; consumer and business travel services; stored value products, such as traveler’s checks and other prepaid products; and network services.

Shareholders receive a 1.4% dividend. Oppenheimer has a $112 price target, while the consensus target is $109.88. The stock closed Thursday at $101.15.

Capital One Financial

This top bank has used relentless advertising to get the firm’s brand well known among consumers. Capital One Financial Corp. (NYSE: COF) is a diversified financial services company that offers a broad array of financial products and services to consumers, small businesses and commercial clients.

Capital One is one of the nation’s 10 largest banks based on deposits. It provides bank lending, treasury management and depository services, as well as credit and debit card products, auto loans and mortgage banking across the United States.

Shareholders receive a 1.68% dividend. The $113 Oppenheimer price objective is in line with the consensus price target of $113.14. Shares closed Thursday at $95.24.

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SLM

This company is the go-to financial institution for college loans. SLM Corp.’s (NYSE: SLM) primary business is to originate and service loans it makes to students and their families to finance the cost of their education. The company is a saving, planning and paying for college company.

SLM is engaged in originating and servicing Private Education Loans it makes to students and their families. It uses Private Education Loans to mean education loans to students or their families that are not made, insured or guaranteed by any state or federal government. The company also operates Upromise, a consumer savings network that provides financial rewards on everyday purchases to help families save for college.

Oppenheimer has set its price target at $16. The consensus target was not available, and shares closed trading on Thursday at $11.75.

These four financial stocks make good sense for investors looking to add quality companies to portfolios. It may make sense to buy partial positions in front of earnings, just to be sure that results are solid.