On Monday, Texas Capital Bancshares (NASDAQ:TCBI) experienced an adjustment in its stock outlook. Keefe, Bruyette & Woods maintained an Outperform rating on the company's shares but reduced the price target to $74 from $76. The firm's analysis followed the release of TCBI's first-quarter earnings for 2024, which did not meet their expectations but were slightly above other Wall Street predictions.
The company reaffirmed its financial guidance for the year, which includes mid-single digit revenue growth and low-single digit expense growth. Keefe, Bruyette & Woods, however, are forecasting a conservative 1% revenue growth for 2024, suggesting there could be significant upside potential if Texas Capital Bancshares achieves its targets. The bank's net interest margin (NIM) and quarter-over-quarter fees showed notable improvement, a positive sign for investors.
Texas Capital Bancshares was active in repurchasing its shares, buying back 1.1% of the company in the first quarter of 2024 and continuing its buyback program into the second quarter. Despite these positive developments, both non-performing assets (NPAs) and criticized loans saw an increase during the quarter, which is a point of concern.
In light of these factors, Keefe, Bruyette & Woods has revised its earnings estimates for 2024 and 2025 to $3.75 and $4.60 per share, respectively. The new price target of $74 reflects the reduced earnings projections, yet the firm maintains its positive Outperform rating. The current stock price trades at 0.88 times the year-out tangible book value (TBV), indicating the firm's belief in the stock's value despite the lowered target.
InvestingPro Insights
In the current financial landscape, Texas Capital Bancshares (NASDAQ:TCBI) presents a mixed bag of financial metrics and analyst outlooks. With a market capitalization of $2.72 billion and a P/E ratio that stands at 17.74, the bank's valuation reflects a tempered market sentiment. The adjusted P/E ratio for the last twelve months as of Q1 2024 is slightly lower at 17.09, hinting at a modest recalibration of earnings expectations.
InvestingPro Tips highlight that although analysts have revised their earnings downwards for the upcoming period, they also predict TCBI will maintain profitability this year, as evidenced by its profitable performance over the last twelve months. However, it is worth noting that the bank does not pay a dividend, which could be a factor for income-focused investors to consider.
From a growth perspective, TCBI has experienced a revenue decline of 16.87% over the last twelve months as of Q1 2024, which may raise concerns about its ability to achieve the mid-single digit revenue growth it has guided for. Despite this, the bank's operating income margin remains strong at 27.49%, suggesting efficient management of its operating expenses.
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