Here's Why Old National Stock is Worth Buying Right Now

Old National Bancorp Price

Old National Bancorp price | Old National Bancorp Quote

Let's dig deeper into the factors that make ONB stock worth buying now.

Earnings Growth: Old National witnessed earnings growth of 9.8% over the past three to five years, outperforming the industry average of 8.5%. This was largely driven by the company's organic growth strategy, solid balance sheet and opportunistic expansions.

Also, the company has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and lagged in one, with the average beat being 2.28%.

While the Zacks Consensus Estimate for earnings indicates a 9.8% decline on a year-over-year basis in 2024, earnings are projected to rebound and grow at the rate of 7.6% in 2025.

Revenue Strength: Driven by diverse revenue streams, solid loan growth and inorganic expansionary measures, Old National's total revenues witnessed a compound annual growth rate (CAGR) of 20.2% over the last five years (2018-2023). Though the trend reversed in the first half of 2024 due to higher deposit costs and lower capital markets income, a high interest rate regime, improving fee income and strategic acquisitions are likely to support top-line expansion, while rising funding costs will weigh on it to some extent.

The Zacks Consensus Estimate for revenues indicates 1.8% and 5.8% growth on a year-over-year basis in 2024 and 2025, respectively.

Strategic Business Restructuring: Old National has been engaged in opportunistic acquisitions and divestitures to expand its footprint and gain market share while boosting operational efficiency. Notably, the company has acquired more than 50 financial institutions since its inception in 1982.

This April, the company completed its merger with CapStar Financial Holdings, Inc. In 2022, the company completed its merger of equals with First Midwest. In the same year, ONB completed the sale of a part of its business that served as a custodian and administrator for health savings accounts.  These strategic initiatives have deepened the company's presence within the United States and helped expand fee income sources while optimizing the business structure.

Strong Balance Sheet: As of Jun 30, 2024, ONB's total cash and cash equivalents (consisting of cash and due from banks and money market and other interest-earning investments) were $1.2 billion. Other borrowings were $849.8 million as of the same date. Hence, a solid liquidity position allows the company to address its near-term obligations.

Impressive Capital Distributions: Old National's dividend payouts are encouraging. The company has been paying dividends regularly, with the most recent one announced in May 2024. Moreover, the company has hiked its dividend once during the last five years. Further, the company has a share repurchase program in place. The plan was authorized this February, enabling the company to buy back up to $200 million worth of shares, with an expiration date of Feb 28, 2025.  As of Jun 30, 2024, the entire authorization remained available.

Given its decent earnings strength and strong liquidity position, the company is expected to continue its capital distribution activities, thus enhancing shareholder value.

Stock Seems Undervalued: ONB's price-to-book and price-to-earnings (F1) ratios of 0.97 and 7.68 are well below the industry average of 1.07 and 10.72, respectively. Thus, the stock seems to be available at a better valuation than its peers.