On Monday, Keefe, Bruyette & Woods adjusted its outlook on Kearny Financial Corp (NASDAQ:KRNY), reducing the price target to $6.00 from the previous $6.75. The firm maintained its Market Perform rating on the stock.
The adjustment follows Kearny Financial's recent earnings report, which showed a modest earnings per share (EPS) beat driven by a lower provision and slightly better core pre-provision net revenue (PPNR). However, the firm anticipates continued net interest margin (NIM) compression for the next several quarters due to certificate of deposit (CD) costs repricing higher.
The revised NIM outlook for the fiscal year 2025 has prompted a lower forecast for the company's EPS in that year. Keefe, Bruyette & Woods expects Kearny Financial's profitability to remain subdued until more sustainable margin improvements take effect in the second half of fiscal 2025. The firm projects a return on tangible common equity (ROTCE) of 4% for both fiscal years 2024 and 2025.
The analyst's commentary highlighted the expectation that shares will likely hover around their current valuation, which stands at 0.6 times tangible book value (TBV). The market performance rating reflects the analyst's view on the stock's low profitability outlook. The new price target of $6.00 is based on a valuation of 0.6 times forward TBV and 16 times the firm's estimated EPS for fiscal year 2025.
InvestingPro Insights
Recent analysis from InvestingPro provides a deeper dive into Kearny Financial Corp's financial health and market performance. The company's aggressive share buyback strategy is a strong signal of management's confidence in the intrinsic value of the stock, aligning with the InvestingPro Tip that highlights management's active role in share repurchases. Additionally, the company's low Price/Book multiple, currently at 0.41, suggests the stock may be undervalued relative to its book value, which could be an attractive entry point for value investors.
Investors seeking income will take note of the significant dividend yield of 7.69%, a testament to Kearny Financial's commitment to returning value to shareholders, as it has maintained dividend payments for 10 consecutive years. Despite the anticipated sales decline and expected drop in net income for the current year, analysts predict the company will remain profitable, which is reflected in the positive net income over the last twelve months.
InvestingPro's real-time data shows a market capitalization of $348.2 million and a Price/Earnings (P/E) Ratio of 22.72, with an adjusted P/E Ratio for the last twelve months as of Q3 2024 at 23.88. The company's stock is trading near its 52-week low, with a price drop of approximately 25.97% over the last three months, indicating potential for a rebound if market conditions favor the company's underlying value and profitability.
For more detailed analysis and additional InvestingPro Tips, readers can explore InvestingPro's full suite of tips. There are 11 more tips available for Kearny Financial Corp, which can provide investors with a comprehensive understanding of the company's potential. To access these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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