BB&T Corporation (BBT) — BBT stock is up more than 4% in the past two days on heavy volume. In Wednesday’s Daily Market Outlook, I noted the rally in regional banks following the minutes from the Federal Reserve’s latest FOMC meeting. The Fed’s indication that an interest rate increase in June is a strong possibility is a positive for the sector, as the income from the interest rate spread should have a big impact on earnings.
In my opinion, BBT stock should be on the list of everyone who wants exposure to the banking sector and this trend.
BB&T is the eighth largest bank in the United States by assets and has a high-quality loan portfolio. S&P Capital IQ Equity Research projects 6.1% loan growth this year, helped by the recent closing of the merger with National Penn Bancshares. As a result of this acquisition, Capital IQ raised its 2016 EPS estimate to $2.85 from $2.78 and its 2017 estimate to $3.23 from $3.02.
Capital IQ rates BBT stock a “Buy” and recently raised its price target by $3 to $38.
While BB&T’s loan loss provisions are expected to increase 40% in 2016, analysts note the bank has relatively low exposure to the energy sector because of its concentration in the southeast United States.
Turning to the chart, BBT stock is still in a downtrend with a bearish resistance line at about $36, drawn from its July 2015 high at $41.90. However, on Wednesday, shares closed above their 50-day moving average at $34.15 on heavy up volume. This break was confirmed Thursday with follow-through buying, also accompanied by high volume.
Support rests at the line drawn from the February closing low near $30.
Traders should look to buy BBT stock at or below its 50-day moving average, now at $34.18, with a trading target of $38 for a potential gain of more than 11%. Investors should consider adding shares to their portfolio as a long-term, high-quality holding in the regional banking industry. BB&T pays an annual dividend of $1.12 per share for a current yield of 3.3%.
