On Tuesday, Piper Sandler adjusted its outlook on Bank of Hawaii (NYSE: BOH), reducing the price target to $60 from $65, while retaining a Neutral rating on the stock.
The adjustment follows a detailed analysis of the bank's financial model, which anticipates narrower net interest margins and a reduced size of earning assets, leading to lower net interest income (NII). Additionally, the bank is expected to experience a slight decline in fee income due to market volatility.
The bank's management has also revised its core expense guidance, now projecting costs to increase by only 1%-2% this year, a decrease from the previously estimated 2%-3%. This change in expense outlook is a contributing factor to the revised price target. Piper Sandler's reassessment of Bank of Hawaii's financials has led to a reduction in both the 2024 and 2025 earnings per share (EPS) estimates by $0.30, now forecasting $3.40 and $3.60, respectively.
The new price target of $60 reflects a 17.6 times multiple of the firm's 2024 EPS estimate, which remains unchanged despite the reduction in the target figure. Piper Sandler's current position reflects caution due to the anticipated financial challenges Bank of Hawaii faces, including the impacts of market volatility on its fee income and the adjustments in net interest income.
The bank's stock performance and future financial results will likely be observed closely to assess the impact of these adjustments and the accuracy of the firm's projections. As market conditions evolve, Bank of Hawaii's ability to manage its net interest margins and expenses will be critical to meeting the revised expectations set forth by Piper Sandler.
InvestingPro Insights
As we consider the financial outlook for Bank of Hawaii, InvestingPro data provides a deeper dive into the company's current standing. With a market capitalization of $2.32 billion and a Price/Earnings (P/E) ratio of 14.05, which adjusts to 14.22 when considering the last twelve months as of Q4 2023, the bank presents a mixed financial picture. The PEG ratio, which stands at -0.58, suggests potential concerns about the company's future earnings growth. However, the bank's commitment to shareholders is evident through its impressive track record of maintaining dividend payments for 53 consecutive years, with a notable dividend yield of 4.79% as of the latest data.
InvestingPro Tips highlight the bank's high shareholder yield and the fact that two analysts have revised their earnings upwards for the upcoming period, indicating a positive sentiment among experts. On the other hand, the bank does suffer from weak gross profit margins, and net income is expected to drop this year. Despite these challenges, analysts predict the company will remain profitable this year, and it has indeed been profitable over the last twelve months. A large price uptick of 25.23% over the last six months suggests investor confidence, although the recent price performance shows a year-to-date total return of -18.44%.
For investors looking for more detailed analysis and additional insights, there are more InvestingPro Tips available for Bank of Hawaii. Using the special coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable insights.
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