On Tuesday, DA Davidson adjusted its outlook for Fulton Financial (NASDAQ:FULT), increasing the price target to $18 from the previous $15 while maintaining a Neutral rating on the stock. The firm's analysis highlighted Fulton Financial's significant expansion in Philadelphia through its acquisition of FRBK, which was supported by the FDIC. This move was well-received by the market, with Fulton Financial's shares seeing an 8% increase.
The transaction is expected to deliver a substantial 20% increase in earnings per share (EPS) and less than 4% dilution in tangible book value (TBV), which is notably low for an FDIC-assisted deal. Additionally, the deal is anticipated to have a swift 1.25-year earnback period. Despite some concerns regarding deal-related disruptions and an initially higher expense run rate impacting the core earnings estimate for 2024, DA Davidson has increased its earnings estimate for 2025 by 17%.
DA Davidson suggests that Fulton Financial could benefit from improved loan growth and net interest margin (NIM) due to reduced funding pressures, now that the company has enhanced its loan-to-deposit (L/D) ratio to 92% from 99%. However, the analyst noted that the current stock valuation already mirrors returns that are on par with its peers.
With the revised price target reflecting a 7% potential upside, DA Davidson reiterated its Neutral stance on Fulton Financial. The firm's analysis indicates that while the recent acquisition presents positive prospects for the bank, the current market price is believed to adequately represent the expected performance.
InvestingPro Insights
In light of DA Davidson's recent analysis of Fulton Financial, it's worth considering additional insights from InvestingPro. Fulton Financial has demonstrated a high shareholder yield, which could be indicative of its commitment to returning value to investors. Additionally, the company has been trading near its 52-week high, reflecting investor confidence and a strong market presence. This aligns with the positive outlook following Fulton's acquisition of FRBK and the subsequent share price increase.
InvestingPro data shows a P/E ratio of 10.29 and a slightly higher adjusted P/E ratio of 11.23 for the last twelve months as of Q1 2024. The company's revenue growth for the same period stands at 3.82%, which could be a sign of steady financial improvement. Moreover, with a dividend yield of 4.05% and a history of maintaining dividend payments for 43 consecutive years, Fulton Financial may appeal to income-focused investors.
For those looking to delve deeper into Fulton Financial's prospects, InvestingPro offers additional tips, including analysis on earnings revisions by analysts and the company's profitability predictions for the year. To access these insights and more, visit https://www.investing.com/pro/FULT and remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 more InvestingPro Tips available that could provide further guidance on Fulton Financial's performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.