Why East West Bancorp (EWBC) Was Upgraded

NEW YORK (TheStreet) -- East West Bancorp  (EWBC) was upgraded to "buy" from "hold" by Deutsche Bank Tuesday.

Eat West Bancorp was gaining 1.3% to $32.22.

The firm set a price target of $38 for the bank chain.

Deutsche Bank expects "solid potential for EWBC to post stronger loan growth vs. expectations (and the group) in FY14 following its more conservative FY14 guidance." The firm also says it expects to see "less noise clouding EPS trends beyond the end of the loss share on non-resi UCBH covered loans in 4Q14."

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Separately, TheStreet Ratings team rates EAST WEST BANCORP INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate EAST WEST BANCORP INC (EWBC) 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 revenue growth, growth in earnings per share, expanding profit margins, solid stock price performance and notable return on equity. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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

  • EWBC's revenue growth has slightly outpaced the industry average of 0.0%. Since the same quarter one year prior, revenues slightly increased by 1.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • EAST WEST BANCORP INC has improved earnings per share by 12.2% 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. We feel that this trend should continue. During the past fiscal year, EAST WEST BANCORP INC increased its bottom line by earning $2.10 versus $1.89 in the prior year. This year, the market expects an improvement in earnings ($2.27 versus $2.10).
  • The gross profit margin for EAST WEST BANCORP INC is currently very high, coming in at 86.88%. 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 29.53% trails the industry average.
  • 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 47.41% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
  • 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 Commercial Banks industry and the overall market on the basis of return on equity, EAST WEST BANCORP INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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