Valley National Bank (VLY) reported first-quarter 2019 earnings per share (EPS) of $0.22, up from $0.18 in the first quarter of last year and $0.21 in the fourth quarter of 2018. Its loan growth was solid at 6.2%, and its cost-cutting efforts are beginning to pay off.
However, net interest margins declined from 2.98% to 3.10% as funding costs continued to rise. I believe these factors, along with investor concerns that margins will continue to contract if the yield curve keeps tightening, are key reasons why the stock is down 4% today after a recent rally.
Even if margins tighten further, I believe the company remains on track to earn $1.00 a share next year, if there is no recession. So, I am sticking with VLY for now due to its cheap valuation and improved execution. Buy VLY under $10.50. My new target is $12.50.
F5 Networks (FFIV) endured a 2% drop in its share price today after reporting its fiscal second-quarter 2019 earnings. Its fiscal Q2 2019 EPS of $2.57 vs. $2.31 for fiscal Q2 2018 was $0.03 better than expected and pretty much in line with its revenue growth of 2%, including a 30% jump in software sales.
The stock is being hurt by slightly light fiscal third-quarter 2019 earnings guidance of $2.54 to $2.57, which is below the estimate of $2.60. However, the company appears to be making strong progress as it transitions more into a software-based organization that helps its clients launch applications across multi-cloud environments.
Little blips versus estimates are not a concern. I continue to recommend the stock below $155. My target is $170.
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