The financial services industry was among the severely impacted industries last year as weak credit demand, low interest rates, and diminished economic activity reduced the revenues of most industry participants. However, the industry is rebounding solidly due to increasing investor participation in the capital markets.
Last week, the major market indices hit fresh all-time highs as the Fed Chairman Jerome Powell hinted that an interest rate hike is highly unlikely in the near term. Though this announcement may not be favorable to the financial services sector, rising financial transactions with economic activities returning to pre-pandemic levels should boost the industry’s growth. Furthermore, the federal government’s efforts to relax some capital and liquidity requirements to help accelerate lending should support the industry’s recovery.
With these factors in mind, we believe the shares of established financial companies Jack Henry & Associates Inc. (JKHY), Santander Consumer USA Holdings Inc. (SC), SEI Investments Company (SEIC), and Janus Henderson Group plc (JHG), which have been witnessing strong momentum lately, could be solid bets now.
Jack Henry & Associates Inc. (JKHY)
JKHY primarily serves financial services businesses in the United States with technological solutions and payment processing services. Under the Jack Henry Banking brand, the Monett, Miss.-based company provides information and transaction processing solutions for banks; core data processing solutions for various credit unions under the Symitar brand; and specialized financial performance, imaging and payments processing, information security and risk management, retail delivery, and on-demand services under the ProfitStars brand.
This month, JKHY’s Symitar division announced that long-time client, Keesler Federal Credit Union, had migrated its core to its private cloud environment.
And last month, JKHY expanded its partnership with Autobooks to provide payment and invoicing features in the Banno Digital Platform. With this collaboration, JKHY became the first major financial technology provider to democratize receivables solutions and integrate them into the digital banking experience.
JKHY’s revenue increased 10% year-over-year to $450.29 million in the fourth quarter, ended June 30, 2021. The company’s operating income increased 25% year-over-year to $96.30 million over this period. In addition, its net income increased 25% year-over-year to $76.86 million, while its EPS grew 30% from the prior-year quarter to $1.04.
A $3.99 consensus EPS estimate for the current year represents a 3.4% improvement year-over-year. JKHY also has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The $1.76 billion consensus revenue estimate for the current year represents a 3.6% increase from the same period last year. Over the past year, the stock has returned 6.1%. Also, it has gained 13.1% in price over the past three months.
JKHY’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JKHY has also rated a B grade for Momentum, Quality, and Stability. In addition, within the Financial Services (Enterprises) industry, it is ranked #15 of 106 stocks.
To see additional POWR Ratings for Growth, Value, and Sentiment for JKHY, click here.
Santander Consumer USA Holdings Inc. (SC)
SC is a specialist consumer finance company that offers car financing and third-party services in the United States. It is based in Dallas, Tex. SC provides automotive financial products and services, such as retail installment contracts and car leases, and dealer loans for inventory, construction, working capital, and revolving lines of credit. In addition, it offers private-label loans and leases, as well as personal loans and point-of-sale finance.
Last month, SC launched a new digital auto finance experience that will streamline and improve dealer interactions with SC and SC’s clients. SC’s digital product suite will enable dealers to “self-service” across key vehicle underwriting touchpoints with the company to simply and effectively increase dealers’ capacity to sell automobiles.
During the second quarter, ended June 30, 2021, SC’s net income came in at $1.06 billion, compared to a $96.68 million net loss in the same period of 2020. In addition, the company reported $3.45 in EPS, compared to a $0.30 per share loss in the prior-year quarter. Moreover, the company’s cash and cash equivalents increased 195.3% year-over-year to $321.98 million.
The company’s EPS is expected to grow 220.2% year-over-year to $9.19 in its fiscal year 2021. Analysts expect SC’s revenue to increase 32% year-over-year to $7.96 billion in the current year. The stock has surged 136.4% in price over the past year and 82.2% over the past nine months.
SC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. SC also has a B grade for Stability, Momentum, and Value. The stock is ranked #5 of 106 stocks in the Financial Services (Enterprises) industry.
Beyond the POWR Ratings grades I have just highlighted, you can see the SC ratings for Growth, Sentiment, and Quality.
SEI Investments Company (SEIC)
SEIC is an asset management holding company based in Oaks, Penn. Through its subsidiaries, it offers client’s wealth management, retirement and investment solutions, asset management, asset administration, investment processing outsourcing solutions, financial services, and investment consulting services.
This month, SEIC launched the SEI Domestic ETF Strategies, adding five new asset allocation-based models to the SEI ETF Strategy family. Through the SEI Wealth Platform, the Strategies provide independent advisers with increased investing freedom. The company aims to offer advisers more flexibility in providing their customers a variety of thoughtfully built and well-diversified model portfolios that prioritize domestic equities and fixed-income exposures.
Last month, SEIC announced a strategic collaboration and technological integration with Wealthbox, a customer relationship management (CRM) software solution built particularly for financial advisers. This partnership will provide preferred tools to advisors and enable them to assist clients to achieve their financial objectives more effectively and efficiently.
For the second quarter, ended June 30, 2021, SEIC’s revenue increased 18.7% year-over-year to $475.65 million. The company’s operating income increased 35.6% year-over-year to $136.02 million over this period, and its net income increased 32.4% year-over-year to $133.78 million. Its EPS grew 36.8% from the prior-year quarter to $0.93.
A $1.9 billion consensus revenue estimate for the current year represents a 13% increase from the same period last year. SEIC’s EPS is expected to increase 24.3% year-over-year to $3.73 in its fiscal year 2021. Also, the stock has returned 19.4% over the past year and 13.6% over the past nine months.
SEIC’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. SEIC is also rated a B grade for Momentum, Quality, and Stability. Within the Asset Management industry, it is ranked #5 of 58 stocks.
Click here to see additional POWR Ratings for Growth, Value, and Sentiment for SEIC.
Janus Henderson Group plc (JHG)
JHG is an asset management holding company that provides services to institutional, retail, and high-net-worth clients. It maintains separate client-focused equities and fixed-income portfolios and manages its customers’ equities, fixed income, and balanced mutual funds. JHG is based in Denver Colo.
This month, JHG announced that three proprietary mutual fund-driven model portfolios and two model-delivered separately managed accounts are now available to financial advisors via Orion Portfolio Solutions, the premier turnkey asset management program of wealthtech platform leader Orion Advisor Solutions. JHG intends to match client needs, investor preferences and further drive its business growth through this move.
JHG’s revenue increased 14.7% year-over-year to $738.4 million in the second quarter ended June 30, 2021. Its operating income grew 16.9% from its year-ago value to $225 million. The company’s net cash from operating activities surged 942.6% year-over-year to $269 million.
Analysts expect JHG’s revenue to increase 21.3% year-over-year to $2.79 billion in its fiscal year 2021. In addition, the company’s EPS is expected to grow 34.2% in the current year. Over the past year, the stock has gained 109.3% in price and 35.3% year-to-date.
It is no surprise that JHG has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Momentum. In the Asset Management industry, it is ranked #10 of 58 stocks.
In addition to the POWR Ratings grades we have just highlighted, one can see the JHG ratings for Growth, Stability, Value, Sentiment, and Quality.
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JKHY shares were trading at $176.24 per share on Monday morning, up $0.31 (+0.18%). Year-to-date, JKHY has gained 9.46%, versus a 21.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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