Here's Why Commerce Bancshares (CBSH) Stock is Worth Buying Now
Commerce Bancshares, Inc. CBSH is well-positioned for top-line growth, supported by decent loan demand and efforts to improve fee income. Supported by a solid balance sheet and earnings strength, its capital distributions seem sustainable.
Analysts also seem optimistic regarding the company’s earnings growth potential. Over the past 60 days, the Zacks Consensus Estimate for CBSH’s earnings has been revised 2.9% and 1.8% upward for 2024 and 2025, respectively. The stock currently carries a Zacks Rank #2 (Buy).
CBSH’s shares have rallied 12.5% in the past six months, compared with the industry’s growth of 17.2%.
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Let’s dig deeper into what makes this stock worth betting on.
Earnings Strength: CBSH’s earnings per share (EPS) witnessed 9% growth over the last three to five years. While its 2024 earnings are expected to decline 10.7% due to high funding costs and a challenging operating backdrop, earnings are expected to grow 2.9% in 2025.
Revenue Growth Potential: Commerce Bancshares’ organic growth trajectory remains impressive. Though the company’s revenues dipped in 2020, the same witnessed a compound annual growth rate (CAGR) of 3.5% over the last five years (2018-2023). The increase was primarily attributed to strong loan balances (witnessing a 4% CAGR over the four-year period ended 2023) and efforts to bolster fee income.
Decent loan demand and efforts to improve non-interest income are likely to keep aiding top-line growth. While we project total revenues to decline in 2024, the trend will likely reverse after that. In 2025 and 2026, revenues are expected to rise 2.8% and 1.7%, respectively. The company’s loan balance is estimated to witness 3.6% year-over-year growth in 2024.
Impressive Capital Distributions: Commerce Bancshares remains actively engaged in capital distribution activities. It has been consistently paying a 5% stock dividend for more than 25 years, with the most recent one being announced in February 2024. Moreover, the company has been paying quarterly cash dividends constantly. It has an active repurchase program in place, with 1.77 million shares available under the authorization as of Dec 31, 2023.
Supported by a strong balance sheet position and earnings strength, the company’s capital distribution activities are expected to remain sustainable, which, in turn, will help enhance shareholders’ value.
Superior Return on Equity (ROE): CBSH’s trailing 12-month ROE is 17.46%, compared with the industry’s 12.43%. This indicates that it reinvests its cash more efficiently than its peers.
Other Stocks Worth Considering
A couple of other top-ranked stocks from the banking space are 1st Source Corp. SRCE and Eagle Bancorp Montana, Inc. EBMT. At present, SRCE and EBMT sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SRCE’s 2024 earnings has been revised 7.1% north over the past 60 days. Over the past six months, shares of 1st Source Corp have risen 17%.
The Zacks Consensus Estimate for EBMT’s current-year earnings has been revised 20% upward over the past 60 days. Eagle Bancorp’s shares have rallied 6.3% over the past six months.
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Commerce Bancshares, Inc. (CBSH) : Free Stock Analysis Report
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