The Federal Reserve this week raised the federal funds rate by 25 basis points for the first time since 2018 to fight 40-year high inflation. After Fed Chair Jerome Powell’s statement on inflation this Monday, the market expects an aggressive rate-increase cycle. Traders are forecasting that the Fed is likely to raise interest rates by 50 basis points at the end of its May and June meetings.
The Fed’s hawkish tilt is expected to benefit financial stocks significantly, given their companies’ increased interest income. The past few months have been difficult for the financial sector owing to a slow economic recovery and geopolitical crises. However, the Fed’s hawkish stance provides a great opportunity to invest in financial stocks, which are expected to surge in the near term. The bullish sentiment surrounding the financial sector is evident in Financial Select Sector SPDR ETF’s (XLF) 17.2% gains over the past year.
Given these factors, we think it advisable to invest in quality financial stocks Evercore Inc. (EVR), Lazard Ltd (LAZ), and Piper Sandler Companies (PIPR). They are each expected to outperform the broader market in the near term.
Evercore Inc. (EVR)
EVR in New York City operates as an independent investment banking firm in the U.S., Europe, Latin America, and internationally. The company operates through two segments: Investment Banking and Investment Management. EVR offers strategic advisory and wealth management services to high-net-worth individuals, foundations, and endowments.
Last month, EVR authorized a $1.4 billion share repurchase program, for 10 million shares of EVR Class A common stock. The share repurchase program authorization reflects the company’s continuing commitment to its capital-return objectives.
In its fiscal year 2021 fourth quarter, ended Dec. 31, 2021, EVR's net revenues increased 15.9% year-over-year to $1.12 billion. The company’s operating income improved 23.4% from the prior-year period to $464.40 million. Its net income attributable to EVR grew 22% year-over-year to $338.30 million. And the company's earnings per share rose 26.1% year-over-year to $7.15.
The $684.79 million consensus revenue estimate for its fiscal 2022 first quarter, ending March 31, 2022, represents a 2.2% year-over-year growth from the same period in 2021. EVR has surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of EVR decreased 14.8% in price year-to-date and 10.3% over the past year. It closed yesterday's trading session at $115.69.
EVR's POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
EVR has an A grade for Quality and a grade B for Value and Momentum. Within the B-rated Investment Brokerage industry, it is ranked #7 of 22 stocks.
To see additional POWR Ratings (Growth, Stability, and Sentiment) for EVR, click here.
Note that EVR is one of the few stocks handpicked by our Chief Value Strategist, Steve Reitmeister, currently in the POWR Value portfolio. Learn more here.
Lazard Ltd (LAZ)
Headquartered in Hamilton, Bermuda, LAZ is a financial advisory and asset management firm that operates in North America, Europe, Asia, Australia, Central, and South America. The company operates in two segments: Financial Advisory and Asset Management. It serves individual clients, government, financial institutions, real estate, industrials, telecommunication, technology, and media.
LAZ formed a strategic alliance with Anne Clarke Wolff and Independence Point Advisors (IPA) in November. "IPA brings a new look and feel, and level of perspective and professionalism to Wall Street that fits well with our continuing evolution in modernizing our firm, while providing a broad array of services to clients, supporting diversity and creating commercial opportunities and adjacent businesses," said Peter R. Orszag, CEO of Lazard Financial Advisory.
LAZ's total operating revenue increased 14% year-over-year to $968 million in its fiscal 2021 fourth quarter, ended Dec. 31, 2021. LAZ’s operating income improved 23.4% year-over-year to $268.34 million. LAZ’s net income grew 13% year-over-year to $217 million. Its net income attributable to LAZ increased 10.8% from its year-ago value to $210.38 million. The company’s net income per share rose 13.4% year-over-year to $1.86.
Analysts expect LAZ's revenue for its fiscal year 2022 first-quarter, ending March 31, 2022, to come in at $707.48 million, representing a 9.2% rise year-over-year. The Street expects the company's EPS for the current quarter to come in at $0.90, representing a 4% increase year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the three trailing four quarters.
LAZ stock has decreased 19.3% in price year-to-date and 18.5% over the past year, and closed yesterday's trading session at $35.23.
LAZ's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a grade of B for Quality, Value, and Momentum. Within the Investment Brokerage industry, it is ranked #6 of 22 stocks.
To see additional component grades of POWR Ratings (Stability, Growth, and Sentiment) for LAZ, click here.
Piper Sandler Companies (PIPR)
PIPR operates as an investment bank and institutional securities firm in the U.S. and internationally. It serves corporations, private equity groups, public entities, non-profit entities, and institutional investors. The Minneapolis, Minn.-based company offers investment banking and institutional sales, trading services, advisory services, public finance investment banking services, loan placement services, equity, fixed-income, and trade execution services.
This month, PIPR announced the final closing of the Piper Heartland Healthcare Crossover Fund I with approximately $200 million in committed capital. “We are building a key capability in our long-term growth plan with the establishment of Piper Heartland Healthcare Capital and the launch of this fund,” said Chad Abraham, Chairman and CEO of PIPR. This development might allow PIPR to pursue proprietary investment opportunities.
In its fiscal year 2021 fourth quarter, ended Dec.31, 2021, PIPR's adjusted net revenues increased 58.6% year-over-year to $633.70 million. The company's adjusted operating income grew 79.3% year-over-year to $194.72 million. And its adjusted net income increased 89.7% from its year-ago value to $142.20 million. PIPR's adjusted earnings per common share grew 88% year-over-year to $7.84.
The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.
PIPR stock has declined 27.1% in price year-to-date and 27.7% over the past three months. It closed yesterday's trading session at $130.22.
PIPR’s POWR Ratings reflect a strong outlook. The stock has an overall rating of B, which translates to Buy in our POWR Ratings system.
PIPR has a B grade for Quality, Momentum, and Value. It is ranked #1 of 22 stocks in the Investment Brokerage industry.
Click here to see PIPR’s POWR Ratings for Sentiment, Growth, and Stability.
EVR shares were trading at $113.98 per share on Friday afternoon, down $1.71 (-1.48%). Year-to-date, EVR has declined -15.63%, versus a -4.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Beaten-Down Financial Stocks to Scoop Up Now StockNews.com
