On Wednesday, Truist Securities adjusted its outlook on shares of First Financial Bankshares (NASDAQ:FFIN), increasing the price target to $39 from the previous $31, while maintaining a Hold rating on the stock. The revision reflects an optimistic view on the bank's earnings potential, driven by robust loan growth and higher loan yields.
The analyst at Truist Securities has revised the earnings per share (EPS) forecast for 2024 and 2025 upwards by 2% and 6%, respectively, setting the new estimates at $1.51 for 2024 and $1.67 for 2025. This adjustment is primarily attributed to an improved forecast for the bank's net interest margin (NIM), which is now expected to reach 3.50% in 2024 and 3.73% in 2025.
The positive revision stems from the anticipation of a sequential increase in net interest income (NII) through 2025, supported by loan growth that is likely to be funded by cash flows from securities. Moreover, the balance sheet's relative neutrality is seen as a factor that could facilitate continued expansion across various interest rate environments.
Despite a 64% increase in non-performing assets (NPAs), attributed to a covenant breach in one owner-occupied commercial real estate relationship, Truist Securities does not foresee any significant losses at this juncture. Capital levels for First Financial Bankshares are reported to be well above the average of its peers, with a common equity tier 1 (CET1) ratio of 18.4%.
In conclusion, the analyst believes that First Financial Bankshares stock is nearing a fair valuation, trading at approximately 22 times the estimated 2025 EPS. The new price target of $39 is based on a 23 times multiple of the projected 2025 earnings.
In other recent news, First Financial Bankshares has been the subject of key analyst revisions and board appointments. Stephens raised the stock's price target to $36 from $31, following strong Q2 results characterized by notable net interest income trends and a significant 16% quarterly loan growth.
This growth has set the stage for the bank to potentially meet its 2024 growth goal. However, Truist Securities revised its price target for the bank downwards to $32 from $34, based on reevaluated earnings per share forecasts for 2024 and 2025.
The bank also saw a 9% rise in classified loans, now comprising 2.1% of the total loan portfolio. Despite this, First Financial is deemed well-positioned for mergers and acquisitions, supported by its strong capital reserves. The bank's merger and acquisition prospects, particularly for 2025, appear promising according to Stephens.
In board appointments, Sally Pope Davis, a financial sector veteran with over thirty years of experience, has joined the Board of Directors of First Financial Bankshares. These recent developments provide investors with insights into the bank's financial adjustments and board appointments.
InvestingPro Insights
Following the updated outlook by Truist Securities on First Financial Bankshares, InvestingPro metrics provide additional insight into the company's financial position. With a market capitalization of $5.33 billion and a P/E ratio standing at 26.62, First Financial Bankshares appears to be valued higher than the industry average.
The company's revenue for the last twelve months as of Q2 2024 was reported at $496.9 million, with a slight revenue decline of 0.84% compared to the previous year. Despite this, the bank has shown a strong operating income margin of 53.43%, underscoring its ability to convert revenues efficiently into profits.
From an investment perspective, two InvestingPro Tips are particularly noteworthy. First, First Financial Bankshares has demonstrated a commitment to shareholder returns, raising its dividend for 13 consecutive years and maintaining dividend payments for an impressive 32 years. Moreover, analysts have revised their earnings upwards for the upcoming period, signaling confidence in the bank's financial performance. These factors, combined with a robust return over the last three months, underscore the bank's solid financial health and potential for continued growth.
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