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Valley National (VLY) Moves 6.9% Higher: Will This Strength Last?

Valley National (VLY) was a big mover last session on higher-than-average trading volume. The latest trend in earnings estimate revisions might not he...

This story originally appeared on Zacks

Valley National (VLY) shares rallied 6.9% in the last trading session to close at $12.90. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 9.3% loss over the past four weeks.

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The increase in investor optimism can be attributed to the announcement of the merger deal. In an effort to diversify revenues, Valley National signed a deal to acquire Bank Leumi Le-Israel B.M.’s U.S. banking arm – Bank Leumi USA for $1.15 billion. Closing of the deal is expected by late first quarter or early second quarter of 2022.

The transaction is expected to be 7% accretive to Valley National’s earnings (on a fully-phased in basis) in 2023. With the acquisition, Valley National will be able to broaden its commercial product offerings, and also expand its technology and venture capital banking business, thereby solidifying its position as a top-tier, relationship-focused commercial bank.

This holding company for Valley National Bank is expected to post quarterly earnings of $0.30 per share in its upcoming report, which represents a year-over-year change of +20%. Revenues are expected to be $340.16 million, up 2.4% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Valley National, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on VLY going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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Valley National Bancorp (VLY): Free Stock Analysis Report


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