Thursday, March 26, 2015

Bank of the Ozarks: Strong Buy on Intervest Acquisition

On Mar 24, Zacks Investment Research upgraded Bank of the Ozarks, Inc. (OZRK Snapshot Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

The uptick in the rank of this Arkansas-based bank was driven by strong estimate revisions due to a number of factors that include a strategic acquisition, strong fourth-quarter 2014 results and a dividend hike.
Image result for Bank of the Ozarks, Inc.

On Feb 10, Bank of the Ozarks announced the timely completion of Intervest Bancshares Corp. (‘IBCA’) acquisition. In Jul 2014, Bank of the Ozarks had signed a definitive agreement to acquire the latter in an all-stock deal. Bank of the Ozarks has shown strong inorganic growth over the years, this being the 12th acquisition in the recent years and probably the biggest.

The acquisition of Intervest Bancshares deepened Bank of the Ozarks’ footprint across New York and Florida, which should bode well for its growth. Additionally, the deal is expected to be immediately accretive to the company’s book value per share as well as its tangible book value per share. Moreover, the company’s diluted earnings per share are projected to improve over the next 12 months.

Moreover, the company reported strong fourth-quarter earnings on Jan 16. Fourth-quarter diluted earnings per share of 43 cents were up 30.3% year over year. Results benefited from top-line growth, partially offset by higher expenses.

Additionally, on Jan 2, the company announced a 4% hike in its quarterly cash dividend to 13 cents per share. The dividend was paid on Jan 23, to shareholders of record Jan 16.

Over the last 60 days, the Zacks Consensus Estimate for 2015 moved up 1.5% to $2.04 per share and it increaased marginally to $2.33 per share for 2016.

Other Stocks to Consider

Other stocks in the southeast banking space worth considering are Customers Bancorp, Inc. (CUBI - Snapshot Report), Pinnacle Financial Partners Inc. (PNFP -Snapshot Report) and Southern First Bancshares, Inc. (SFST - Snapshot Report). All three stocks sport the same Zacks Rank as Bank of the Ozarks.

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