On Wednesday, Piper Sandler adjusted its outlook on Peoples Bancorp (NASDAQ:PEBO) shares, decreasing the price target to $36 from the previous $39, while continuing to support an Overweight rating on the stock. The revision follows Peoples Bancorp's third-quarter results, which presented a mixed financial picture.
The firm noted that Peoples Bancorp's fee revenue growth outperformed expectations, benefiting from the company's diversified core fee income businesses. Moreover, the company managed to keep operating expenses in check. Both trends are expected to persist into the future.
However, the bank's core net interest income (NII), excluding purchase accounting adjustments (PAA), did not meet the firm's projections. This shortfall was partly attributed to a contraction in the loan portfolio, primarily related to acquired loans. Credit quality metrics also showed a mixed performance.
In response to these results, Piper Sandler has revised its earnings per share (EPS) estimates for the fourth quarter of 2024 and the full year of 2025 to $0.76 and $3.10, respectively, marking a decrease of $0.07 and $0.28. The firm has also introduced an EPS estimate of $3.40 for 2026.
The new stock price target of $36 reflects an 11.5 times multiple on the firm's 2025 earnings estimate, which remains unchanged and is largely in line with the peer group average of 11.8 times. Piper Sandler's stance is that Peoples Bancorp is well-positioned to command a market valuation similar to its peers due to its robust profitability outlook.
The firm anticipates nonperforming costs to moderate in the coming year and sees Peoples Bancorp's approach to surpassing the $10 billion asset threshold as beneficial to shareholders.
In other recent news, Peoples Bancorp Inc . reported significant financial results and developments. The company reported a core non-interest expense of $68.8 million for the quarter, and a tangible book value per common share of $18.91 as of June 30, 2024. The pre-provision net revenue for the quarter was $42.3 million, marking an increase from the same period last year.
Peoples Bancorp Inc. also reported an adjusted net income of $29.6 million for the quarter, which translates to an annualized net income of $119.1 million. Furthermore, the company declared a quarterly cash dividend of $0.40 per common share, payable in August 2024. This dividend distribution represents 49% of the company's reported earnings for the second quarter of 2024.
Analysts at Keefe, Bruyette & Woods and DA Davidson have updated their outlooks for the company, with the former reducing its price target and the latter maintaining a Buy rating. In terms of mergers, Peoples Bancorp Inc. is optimistic about the benefits of the Limestone merger, anticipating loan growth of 6-8% for 2024. These are the recent developments surrounding Peoples Bancorp Inc.
InvestingPro Insights
To complement Piper Sandler's analysis, recent data from InvestingPro offers additional context on Peoples Bancorp's financial position. The company's P/E ratio stands at 8.68, suggesting it may be undervalued relative to its earnings. This could align with Piper Sandler's Overweight rating, despite the lowered price target.
InvestingPro Tips highlight that Peoples Bancorp has maintained dividend payments for an impressive 51 consecutive years, demonstrating a strong commitment to shareholder returns. This is particularly noteworthy given the current dividend yield of 5.23%, which may attract income-focused investors.
However, it is important to note that 4 analysts have revised their earnings downwards for the upcoming period, which aligns with Piper Sandler's reduced EPS estimates. This could indicate some near-term challenges for the bank.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Peoples Bancorp, providing a deeper understanding of the company's financial health and market position.
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