On Tuesday, Keefe, Bruyette & Woods adjusted its price target for shares of Cathay General Bancorp (NASDAQ:CATY), decreasing it to $41.00 from the previous $46.00, while retaining a Market Perform rating on the stock.
The revision follows the company's first-quarter 2024 performance, which included a beat on low provision and taxes but fell short in terms of net interest income (NII) trends and net interest margin (NIM) outlook.
The financial services company's results were impacted by ongoing deposit pressures and a modest decline in loan growth, leading to the trimmed NIM forecast. In response to these developments, Keefe, Bruyette & Woods has revised its earnings estimates for Cathay General Bancorp for the years 2024 and 2025, reducing them by 5% for each year.
Despite the adjustments, analysts noted that Cathay General Bancorp maintains a solid capital position, with a common equity tier 1 (CET1) ratio of 13.1%. Moreover, its balance sheet valuation remains relatively inexpensive at 1.1 times tangible book value (TBV).
Still, the company's higher commercial real estate (CRE) exposure, which constitutes 51% of its loan portfolio, and lower CRE reserves at 78 basis points, have prompted a cautious stance from the analysts.
The Market Perform rating suggests that the firm anticipates the stock to perform in line with the broader market, without showing significant outperformance or underperformance in the near term. The new stock price target of $41.00 reflects the firm's adjusted expectations based on the factors influencing the bank's financial outlook.
InvestingPro Insights
As Cathay General Bancorp (NASDAQ:CATY) navigates a challenging financial landscape, InvestingPro data provides a deeper look into the company's current market position. With a market capitalization of approximately $2.66 billion and a price-to-earnings (P/E) ratio of 8.12, Cathay General Bancorp exhibits a valuation that may attract investors looking for potentially undervalued stocks.
Notably, the company's P/E ratio has remained stable, with a slight adjustment to 8.08 when looking at the last twelve months as of Q1 2024. Despite a decrease in revenue growth of -5.6% over the last twelve months, Cathay General Bancorp shows a robust operating income margin of 65.88%, suggesting efficient management of its operations.
InvestingPro Tips highlight several factors that could influence investor decisions. Analysts have raised concerns about the company's near-term earnings growth, as it currently trades at a high P/E ratio relative to this metric. Moreover, the company suffers from weak gross profit margins and is expected to see a drop in net income this year.
On a positive note, Cathay General Bancorp has demonstrated a commitment to shareholders by maintaining dividend payments for 34 consecutive years, with a dividend yield of 3.71% as of the last dividend date. Moreover, the stock price has experienced a significant decline over the last three months, which could present a buying opportunity for long-term investors.
For those interested in a more comprehensive analysis, InvestingPro offers additional insights and metrics. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and unlock the full suite of InvestingPro Tips for Cathay General Bancorp at https://www.investing.com/pro/CATY.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.