On Wednesday, Stephens reduced the stock price target for Atlantic Union Bankshares (NASDAQ:NYSE:AUB) to $40 from $43, while retaining an Overweight rating on the stock. The firm's analysis pointed to a greater than anticipated net interest margin (NIM) compression of 15 basis points, which resulted in core pre-provision net revenue (PPNR) falling short of consensus estimates by 4% and below Stephens' own expectations by 2%.
This was attributed in part to the performance in the current quarter and a more conservative outlook for the remainder of the year, influenced by the recent acquisition of American National Bank and Trust Company (AMNB).
The revised outlook for the year also reflects the impact of the earnings miss, but Stephens anticipates an upside to consensus estimates for the fourth quarter of 2024 and for 2025. The firm has adjusted its highest on the Street operating earnings per share (EPS) estimate to $2.90, down from $3.20, and its 2025 estimate to $3.55 from $3.70, excluding CECL day 2 adjustments.
Atlantic Union Bankshares' stock performance lagged behind the KBW Regional Banking Index (KRX) by 3% following the earnings report. Despite this, Stephens remains positive about the bank's proactive measures to improve profitability, the anticipated completion of the AMNB deal, and the potential for these factors to act as catalysts for higher consensus earnings in 2025.
The bank's modest asset-sensitive position in an environment where interest rates are expected to remain high for an extended period is also seen as a positive factor.
The firm notes Atlantic Union Bankshares' lower price-to-earnings (P/E) ratio compared to peers, despite having an above-peer return on assets (ROA) and PPNR, as well as a return on tangible common equity (ROTCE) outlook that could support multiple expansion on tangible book value (TBV). With a 21% increase to the revised price target of $40, Stephens reaffirms its Overweight rating on the stock.
InvestingPro Insights
Atlantic Union Bankshares (NASDAQ:AUB) continues to be a point of interest for investors, and real-time data from InvestingPro provides a deeper dive into the company's financial health. With a Price/Earnings (P/E) Ratio of 12.89, the bank is trading at a valuation that could be considered reasonable in the current market, particularly when paired with a high shareholder yield.
Moreover, the Price/Book (P/B) Ratio at 0.96 suggests that the stock might be undervalued relative to the company's book value.
InvestingPro Tips highlight the bank's robust history of dividend payments, having maintained them for 31 consecutive years and raising them for 13 consecutive years, which speaks to a strong commitment to returning value to shareholders. This is reinforced by a dividend yield of 3.89%, which is attractive to income-focused investors. Moreover, analysts predict that Atlantic Union Bankshares will be profitable this year, with profitability already demonstrated over the last twelve months.
For readers looking to gain further insights into Atlantic Union Bankshares or other stocks, InvestingPro offers additional tips and metrics. There are currently 6 more InvestingPro Tips available for AUB, which can be accessed through InvestingPro's platform. To enrich your investment strategy and for a deeper analysis, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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