Why SunTrust Banks (STI) Stock Closed Higher Today

NEW YORK (TheStreet) -- Shares of SunTrust Banks, Inc. (STI) closed up 1.61% to $40.49 today after the bank reached a $968 million agreement with the U.S. to settle allegations of abusive mortgage lending and servicing practices, the Wall Street Journal reports.

The Justice Department announced the settlement today which involves 49 state attorneys general and several federal agencies. 

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TheStreet Ratings team rates SUNTRUST BANKS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SUNTRUST BANKS INC (STI) 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, increase in net income, good cash flow from operations, expanding profit margins and growth in earnings per share. 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:

  • 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 27.73% 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, STI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • 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 15.1% when compared to the same quarter one year prior, going from $352.00 million to $405.00 million.
  • Net operating cash flow has increased to $830.00 million or 33.65% when compared to the same quarter last year. In addition, SUNTRUST BANKS INC has also vastly surpassed the industry average cash flow growth rate of -42.10%.
  • The gross profit margin for SUNTRUST BANKS INC is currently very high, coming in at 89.00%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, STI's net profit margin of 19.04% significantly trails the industry average.
  • SUNTRUST BANKS INC has improved earnings per share by 15.9% 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, SUNTRUST BANKS INC reported lower earnings of $2.41 versus $3.59 in the prior year. This year, the market expects an improvement in earnings ($3.13 versus $2.41).
  • You can view the full analysis from the report here: STI Ratings Report

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