Why Teche Holding (TSH) Exploded on Monday

NEW YORK (TheStreet) -- Teche Holding (TSH), a commercial Louisianan bank, exploded on Monday, gaining 29.2% to $70.43 by early afternoon.

Earlier, Iberiabank (IBKC) announced it had signed a definitive agreement to merge with Teche, a deal approved by both companies' boards. The merger, subject to regulatory approval, is expected to close in the second quarter of 2014.

"We believe this combination with IBKC provides tremendous value to our shareholders in both the near-term and long-term," said Teche CEO Patrick Little in a statement. "Our clients will benefit from an expanded array of products and services, along with the added convenience of nearly 200 bank locations in six states."

As part of the deal, Teche shareholders will receive 1.162 shares of IBKC common stock for each Teche holding. Based on IBKC's Friday close of $62.10, this puts the transaction value at around $161 million, or $72.16 for each Teche share, a 32% increase over Teche's Friday close of $54.50.

By early afternoon, Iberiabank shares were unchanged at $62.10.

TheStreet Ratings team rates TECHE HOLDING CO as a Buy with a ratings score of A. The team has this to say about their recommendation:

"We rate TECHE HOLDING CO (TSH) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, attractive valuation levels, expanding profit margins, notable return on equity and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 36.62% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TSH should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for TECHE HOLDING CO is currently very high, coming in at 88.32%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, TSH's net profit margin of 15.76% significantly trails the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, TECHE HOLDING CO has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The revenue fell significantly faster than the industry average of 104.7%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

TheStreet Ratings team rates IBERIABANK CORP as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate IBERIABANK CORP (IBKC) a BUY. This is driven by some important positives, 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 good cash flow from operations, expanding profit margins, increase in stock price during the past year, growth in earnings per share and increase in net income. We feel these 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:

  • Net operating cash flow has significantly increased by 1344.75% to $112.83 million when compared to the same quarter last year. In addition, IBERIABANK CORP has also vastly surpassed the industry average cash flow growth rate of 119.99%.
  • The gross profit margin for IBERIABANK CORP is currently very high, coming in at 91.39%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, IBKC's net profit margin of 15.28% significantly trails the industry average.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • IBERIABANK CORP has improved earnings per share by 6.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, IBERIABANK CORP increased its bottom line by earning $2.61 versus $1.85 in the prior year. For the next year, the market is expecting a contraction of 16.7% in earnings ($2.18 versus $2.61).
  • IBKC, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 4.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

More from Markets

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Week Ahead: Trade Fears and Stress Tests Signal More Volatility To Come

Trump Takes Aim at Auto Imports; Markets End Mixed -- ICYMI

Trump Takes Aim at Auto Imports; Markets End Mixed -- ICYMI

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

Flashback Friday: The Market Movers

Flashback Friday: The Market Movers