The firm said it upgraded the bank holding company's rating based on its 2014 first quarter earnings.
"While we indicated last quarter we were becoming more favorable to the name again, we are more convinced estimates will continue on an upward trend with loan growth and the [net interest margin] NIM likely continuing to surprise to the upside," Sterne Agee said.
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, expanding profit margins, growth in earnings per share, increase in net income and solid stock price performance. 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:
- The revenue growth came in higher than the industry average of 12.8%. Since the same quarter one year prior, revenues rose by 14.8%. 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 8.0% 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 ($2.28 versus $2.10).
- The net income growth from the same quarter one year ago has significantly exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 6.5% when compared to the same quarter one year prior, going from $72.09 million to $76.74 million.
- The gross profit margin for EAST WEST BANCORP INC is currently very high, coming in at 87.05%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 28.29% significantly outperformed against 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 42.35% over the past year, a rise that has exceeded that of the S&P 500 Index. 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.
- You can view the full analysis from the report here: EWBC Ratings Report