The broader stock averages were mixed on Friday and the S&P 500 ended last week fractionally higher. Financials and Utilities led the rally, while the Consumer Discretionary sector lagged.
On Friday, the July jobs data topped projections. Last month the U.S. economy added 943,000 non-farm payrolls, while the headline unemployment figure moved down to 5.4%.
On one hand, this can be seen as a positive sign. The U.S. economy is continuing its recovery even as the COVID-19 Delta variant spreads. On the other, it means that we may be a couple of months closer to a return to pre-pandemic employment levels and the Federal Reserve may consider raising interest rates again.
Earlier in the week, the Institute for Supply Management (ISM) said its July manufacturing index fell short of expectations, while the services index came in higher.
Earnings season is wrapping up. Over 440 companies from the S&P 500 have already posted results. More than 87% of those firms have surpassed the consensus analyst profit estimate. According to Refnitiv, aggregate profit for the S&P 500 is expected to increase 93% from a year ago, leveraged from 24% sales growth.
The Week Ahead
On the economic front, the focus shifts back toward inflation next week. We’ll get a look at the July U.S. consumer price index (CPI) Wednesday and producer prices (PPI) a day later. Friday offers the preliminary reading of the Univ. of Michigan consumer sentiment.
Following the snap-back recovery in stocks last year from Pandemic lows, we believe that investment gains will be harder to come by in 2021. As a result, deciding what and when to buy can be challenging for any investor. However, the fact remains that attractive investments are out there if you’re willing to dig a little deeper.
One such Financial name is worth a closer look and is our Stock of the Week.
Stock of the Week: Synovus (SNV)
The company is a Georgia-based bank, with nearly 300 branches across five Southeastern states. The stock gained 6% last week and we believe this outperformance can continue in the second half of 2021. Here’s why:
Synovus has strong operating momentum, after delivering better-than-expected quarterly results last month. The bank earned $1.20 a share in the second quarter as revenue increased 11% from a year ago, to $489.7 million.
Traditional banks are leveraged to a steeper interest rate yield curve, which should suit the company in the coming quarters. That’s because banks make loans (charging long-term rates) with money raised by taking in deposits (paying short-term rates).
The stock is currently trading at just 1.5x tangible book value, a discount to the average industry valuation of 1.9x.
Wall Street agrees that the bank has value. All seven active analysts tracked by TipRanks rate Synovus a Buy and the average price target of $51.71 represents 19.2% upside potential.
In addition, the company carries a Smart Score of 8/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.
On top of the positive aspects mentioned already, the Smart Score indicates that shares have improving sentiment from hedge funds and financial bloggers.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.
