NEW YORK (TheStreet) -- Astoria Financial (AF) stock is lower by 7.82% to $16.50 on heavy volume in early afternoon trading on Thursday, after agreeing to merge with New York Community Bancorp (NYCB) in a deal valued at $2 billion.
Investors are likely concerned that, in light of the merger, New York Community Bancorp expects a one-time charge of $614 million, plans to issue equity to pay off debt, will cut its dividend in fiscal 2016 to 17 cents per quarter from 25 cents per quarter and will become a domestic systemically important bank subject to further regulator scrutiny, Barron's reports.
About 6.41 million shares of Astoria Financial have been traded so far today, well above the company's average trading volume of roughly 738,832 shares a day.
Under the terms of the agreement, Astoria shareholders will receive one share of New York Community stock and 50 cents in cash for each share.
The deal values Astoria at $19.66 per share, a roughly 15% premium to its closing price on October 22, Bloomberg reports. It is expected to close in the fiscal 2016 fourth quarter.
Shares of both regional banks are lower this afternoon, with New York City Bancorp (NYCB) stock tumbling 9.60% to $17.26 today.
Separately, TheStreet Ratings team rates ASTORIA FINANCIAL CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate ASTORIA FINANCIAL CORP (AF) a BUY. This is driven by several positive factors, 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 solid stock price performance, increase in net income, reasonable valuation levels, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 45.00% and other important driving factors, this stock has surged by 37.52% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AF should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Thrifts & Mortgage Finance industry average. The net income increased by 40.9% when compared to the same quarter one year prior, rising from $22.30 million to $31.43 million.
- Net operating cash flow has slightly increased to $19.70 million or 5.75% when compared to the same quarter last year. In addition, ASTORIA FINANCIAL CORP has also vastly surpassed the industry average cash flow growth rate of -139.24%.
- The gross profit margin for ASTORIA FINANCIAL CORP is currently very high, coming in at 76.99%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 23.39% trails the industry average.
- You can view the full analysis from the report here: AF