NEW YORK (TheStreet) -- Financial services stocks were hit hard in the first quarter.

The S&P 500 Financials Index dropped 2.51% for the first three months of the year, underperforming the broader S&P 500 Index, which inched just 0.44% higher for the same time period. But some financial stocks performed even worse than their sector index.

TheStreet paired the 10 worst performing financial sector stocks with TheStreet Ratings to determine whether they really are poor investments going forward.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which stocks were among the worst financial services performers in the S&P 500 for the quarter. And when you're done with that be sure to find out which health care company had the best performance in the S&P 500 for the first quarter.

 

WY Chart WY data by YCharts

10. Weyerhaeuser Co. (WY - Get Report)
Market Cap: $17 billion
Year-to-date return: -7.63%
TheStreet Ratings: Buy, A-

Weyerhaeuser Co. is a real estate investment trust. It primarily invests in United States. The firm operates under four business segments, timberlands, wood products, cellulose fibers and real estate. It owns timberlands primarily in the U.S and has long-term licenses in Canada.

"We rate WEYERHAEUSER CO (WY) 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, impressive record of earnings per share growth, compelling growth in net income, revenue growth and notable return on equity. 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:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • WEYERHAEUSER CO reported significant earnings per share improvement 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, WEYERHAEUSER CO increased its bottom line by earning $1.38 versus $0.83 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus $1.38).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 227.8% when compared to the same quarter one year prior, rising from $54.00 million to $177.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 1.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, WEYERHAEUSER CO's return on equity exceeds that of both the industry average and the S&P 500.

 

 

MS Chart MS data by YCharts

9. Morgan Stanley (MS - Get Report)
Market Cap: $71 billion
Year-to-date return: -8.02%
TheStreet Ratings: Buy, B

Morgan Stanley, a financial holding company, provides various financial products and services to corporations, governments, financial institutions, and individuals worldwide.

"We rate MORGAN STANLEY (MS) 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 notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • MORGAN STANLEY has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, MORGAN STANLEY increased its bottom line by earning $1.58 versus $1.38 in the prior year. This year, the market expects an improvement in earnings ($2.90 versus $1.58).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.2%. Since the same quarter one year prior, revenues slightly dropped by 4.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Capital Markets industry and the overall market on the basis of return on equity, MORGAN STANLEY underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 2040.5% when compared to the same quarter one year ago, falling from $84.00 million to -$1,630.00 million.

AIZ Chart AIZ data by YCharts

8. Assurant Inc. (AIZ - Get Report)
Market Cap: $4.2 billion
Year-to-date return: -10.26%
TheStreet Ratings: Buy, B+

Assurant, Inc., through its subsidiaries, provides specialized insurance products and related services in North America, Latin America, Europe, and internationally.

"We rate ASSURANT INC (AIZ) 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 revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • The revenue growth came in higher than the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 9.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Although AIZ's debt-to-equity ratio of 0.23 is very low, it is currently higher than that of the industry average.
  • ASSURANT INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ASSURANT INC increased its bottom line by earning $6.42 versus $6.30 in the prior year. For the next year, the market is expecting a contraction of 3.8% in earnings ($6.18 versus $6.42).
  • The share price of ASSURANT INC has not done very well: it is down 5.84% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

 

 

RF Chart RF data by YCharts


7. Regions Financial Corp. (RF - Get Report)
Market Cap: $12.9 billion
Year-to-date return: -10.51%
TheStreet Ratings: Buy, B

Regions Financial Corporation, together with its subsidiaries, provides banking and bank-related services to individual and corporate customers in the United States.

"We rate REGIONS FINANCIAL CORP (RF) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its expanding profit margins over time. 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 gross profit margin for REGIONS FINANCIAL CORP is currently very high, coming in at 93.89%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.72% is above that of the industry average.
  • REGIONS FINANCIAL CORP's earnings per share declined by 17.6% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, REGIONS FINANCIAL CORP's EPS of $0.78 remained unchanged from the prior years' EPS of $0.78. This year, the market expects an improvement in earnings ($0.80 versus $0.78).
  • RF, with its decline in revenue, slightly underperformed the industry average of 1.6%. Since the same quarter one year prior, revenues slightly dropped by 7.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income has decreased by 7.0% when compared to the same quarter one year ago, dropping from $227.00 million to $211.00 million.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, RF has underperformed the S&P 500 Index, declining 15.37% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.


PRU Chart PRU data by YCharts

6. Prudential Financial Inc. (PRU - Get Report)
Market Cap: $36.5 billion
Year-to-date return: -11.22%
TheStreet Ratings: Hold, C+

Prudential Financial, Inc. provides insurance, investment management, and other financial products and services to individual and institutional customers in the United States and internationally.

"We rate PRUDENTIAL FINANCIAL INC (PRU) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and poor profit margins."

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

  • PRU's very impressive revenue growth greatly exceeded the industry average of 5.5%. Since the same quarter one year prior, revenues leaped by 58.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 169.20% to $7,974.00 million when compared to the same quarter last year. In addition, PRUDENTIAL FINANCIAL INC has also vastly surpassed the industry average cash flow growth rate of 5.97%.
  • PRUDENTIAL FINANCIAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, PRUDENTIAL FINANCIAL INC turned its bottom line around by earning $3.08 versus -$1.61 in the prior year. This year, the market expects an improvement in earnings ($9.70 versus $3.08).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Insurance industry. The net income has significantly decreased by 217.2% when compared to the same quarter one year ago, falling from -$460.00 million to -$1,459.00 million.
  • The share price of PRUDENTIAL FINANCIAL INC has not done very well: it is down 6.04% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.

 

DFS Chart DFS data by YCharts

5. Discover Financial Services Inc. (DFS - Get Report)
Market Cap: $25.9 billion
Year-to-date return: -13.96%
TheStreet Ratings: Buy, B-

Discover Financial Services operates as a direct banking and payment services company in the United States. It operates in two segments, Direct Banking and Payment Services.

"We rate DISCOVER FINANCIAL SVCS INC (DFS) 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 revenue growth, good cash flow from operations, expanding profit margins, reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • The revenue growth came in higher than the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 4.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has slightly increased to $1,000.00 million or 1.83% when compared to the same quarter last year. Despite an increase in cash flow of 1.83%, DISCOVER FINANCIAL SVCS INC is still growing at a significantly lower rate than the industry average of 264.92%.
  • 41.80% is the gross profit margin for DISCOVER FINANCIAL SVCS INC which we consider to be strong. Regardless of DFS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 16.05% trails the industry average.
  • DISCOVER FINANCIAL SVCS INC's earnings per share declined by 29.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, DISCOVER FINANCIAL SVCS INC reported lower earnings of $4.90 versus $4.96 in the prior year. This year, the market expects an improvement in earnings ($5.33 versus $4.90).

 

BAC Chart BAC data by YCharts

4. Bank of America Corp. (BAC - Get Report)
Market Cap: $163.6 billion
Year-to-date return: -13.97%
TheStreet Ratings: Buy, B-

Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle market businesses, institutional investors, large corporations, and governments worldwide.

"We rate BANK OF AMERICA CORP (BAC) 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. Among the primary strengths of the company is its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

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

  • The gross profit margin for BANK OF AMERICA CORP is currently very high, coming in at 87.12%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.35% is above that of the industry average.
  • BANK OF AMERICA CORP's earnings per share declined by 13.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, BANK OF AMERICA CORP reported lower earnings of $0.35 versus $0.91 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $0.35).
  • BAC, with its decline in revenue, underperformed when compared the industry average of 1.6%. Since the same quarter one year prior, revenues fell by 13.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income has decreased by 11.3% when compared to the same quarter one year ago, dropping from $3,439.00 million to $3,050.00 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANK OF AMERICA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
GNW Chart GNW data by YCharts

3. Genworth Financial Inc. (GNW - Get Report)
Market Cap: $3.9 billion
Year-to-date return: -14%
TheStreet Ratings: Sell, D+

Genworth Financial, Inc. provides insurance, retirement, and homeownership solutions in the United States and internationally. It operates through U.S. Life Insurance, International Mortgage Insurance, U.S. Mortgage Insurance, International Protection, and Runoff segments.

"We rate GENWORTH FINANCIAL INC (GNW) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Insurance industry. The net income has significantly decreased by 465.4% when compared to the same quarter one year ago, falling from $208.00 million to -$760.00 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Insurance industry and the overall market, GENWORTH FINANCIAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 57.74%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 464.28% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • GENWORTH FINANCIAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GENWORTH FINANCIAL INC swung to a loss, reporting -$2.51 versus $1.15 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus -$2.51).
  • Despite currently having a low debt-to-equity ratio of 0.46, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.

 

HST Chart HST data by YCharts

2. Host Hotels & Resorts Inc. (HST - Get Report)
Market Cap: $15.5 billion
Year-to-date return: -15.10%
TheStreet Ratings: Buy, A

Host Hotels & Resorts, Inc. is a publicly owned real estate investment trust (REIT). The firm primarily engages in the ownership and operation of hotel properties. It invests in the real estate markets of United States.

"We rate HOST HOTELS & RESORTS INC (HST) 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 compelling growth in net income, revenue growth, reasonable valuation levels, good cash flow from operations and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows low profit margins."

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

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 106.5% when compared to the same quarter one year prior, rising from $123.00 million to $254.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.1%. Since the same quarter one year prior, revenues slightly increased by 3.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $386.00 million or 19.87% when compared to the same quarter last year. In addition, HOST HOTELS & RESORTS INC has also modestly surpassed the industry average cash flow growth rate of 13.05%.
  • HOST HOTELS & RESORTS INC reported significant earnings per share improvement 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, HOST HOTELS & RESORTS INC increased its bottom line by earning $0.97 versus $0.27 in the prior year. For the next year, the market is expecting a contraction of 35.0% in earnings ($0.63 versus $0.97).

 

AXP Chart AXP data by YCharts

1. American Express Co. (AXP - Get Report)
Market Cap: $80.7 billion
Year-to-date return: -16.04%
TheStreet Ratings: Buy, B+

American Express Company, together with its subsidiaries, provides charge and credit payment card products and travel-related services to consumers and businesses worldwide. The company operates through four segments: U.S.

"We rate AMERICAN EXPRESS CO (AXP) a BUY. This is driven by multiple strengths, 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 notable return on equity, good cash flow from operations, increase in net income, growth in earnings per share and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

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

  • 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. When compared to other companies in the Consumer Finance industry and the overall market, AMERICAN EXPRESS CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Net operating cash flow has significantly increased by 598.83% to $2,404.00 million when compared to the same quarter last year. In addition, AMERICAN EXPRESS CO has also vastly surpassed the industry average cash flow growth rate of 264.92%.
  • The net income growth from the same quarter one year ago has exceeded that of the Consumer Finance industry average, but is less than that of the S&P 500. The net income increased by 10.6% when compared to the same quarter one year prior, going from $1,308.00 million to $1,447.00 million.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.7%. Since the same quarter one year prior, revenues slightly dropped by 2.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • AMERICAN EXPRESS CO has improved earnings per share by 14.9% 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, AMERICAN EXPRESS CO increased its bottom line by earning $5.55 versus $4.88 in the prior year. For the next year, the market is expecting a contraction of 0.9% in earnings ($5.50 versus $5.55).