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Why First Niagara Financial Group (FNFG) Is Down Today

NEW YORK (TheStreet) -- First Niagara Financial Group  (FNFG) was falling 9.72% to $9.34 on Friday after the company forecast 2014 earnings could fall under Wall Street estimates.

First Niagara reported that its fourth-quarter profit increased 27% to $77.7 million, but the company said its operating income in 2014 would fall between 72 cents a share and 75 cents a share. Analysts polled by Bloomberg expected on 79 cents a share.

"First Niagara is solid at its core, but we've been underperforming," Chief Executive Officer Gary Crosby, who became interim CEO in March and took the post permanently in December, told analysts on a conference call, according to Bloomberg. Expenses will likely rise, which should reflect "a combination of higher staffing to execute projects and to operate the new product and service platforms, as well as higher technology and depreciation expenses and professional fees."

Crosby added that the spending will to increased revenue in upcoming years.

The stock dropped as much as 12% on Friday, the biggest drop for the Buffalo-based company since Dec. 2008, according to Bloomberg.

TheStreet Ratings team rates First Niagara as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate FIRST NIAGARA FINANCIAL GRP (FNFG) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels, good cash flow from operations, solid stock price performance and impressive record of earnings per share growth. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Commercial Banks industry average. The net income increased by 35.5% when compared to the same quarter one year prior, rising from $58.38 million to $79.14 million.
  • Net operating cash flow has significantly increased by 4024.50% to $200.54 million when compared to the same quarter last year. In addition, FIRST NIAGARA FINANCIAL GRP has also vastly surpassed the industry average cash flow growth rate of 20.97%.
  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 27.09%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • FIRST NIAGARA FINANCIAL GRP has improved earnings per share by 42.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FIRST NIAGARA FINANCIAL GRP reported lower earnings of $0.40 versus $0.65 in the prior year. This year, the market expects an improvement in earnings ($0.75 versus $0.40).
  • You can view the full analysis from the report here: FNFG Ratings Report

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