Piper Sandler adjusted its outlook on Great Southern Bancorp (NASDAQ:GSBC), reducing the price target to $62 from $64 while maintaining a Neutral rating on the stock. The revision follows the firm's assessment of the company's third-quarter results and updates to its financial model.
The firm's analyst cited several factors for the updated model, including an improved margin outlook, slightly stronger loan growth, and lower expenses. However, Piper Sandler also noted the removal of share repurchases from the forecast for the coming quarters, anticipating that the company will prioritize retaining capital and liquidity. This change is made in light of the upcoming call date and repricing of Great Southern Bancorp's $75 million subordinated debt in June of the following year.
In light of these adjustments, Piper Sandler raised its earnings per share (EPS) estimates for Great Southern Bancorp for the years 2024 and 2025. The new estimates are increased by $0.23 and $0.40, respectively, resulting in anticipated EPS of $5.33 for 2024 and $5.35 for 2025. Additionally, the firm introduced a 2026 EPS estimate of $6.00, which assumes a gradual margin expansion, mid-single-digit loan growth, slight positive operating leverage, and continued strong credit quality.
Despite the improved earnings outlook, the price target was lowered due to lower multiples among Midwestern peer banks. The new target represents an 11.6 times multiple of the firm's 2025 EPS estimate, a decrease from the previous 12.9 times multiple. Piper Sandler's revised price target reflects a cautious but updated perspective on Great Southern Bancorp's financial trajectory.
Great Southern Bank reported a strong Q3 2024 performance, with earnings of $1.41 per diluted share and a net income of $16.5 million. This is an increase from $1.33 per share in the same quarter last year, despite challenging economic conditions. The bank's assets have surpassed $6 billion, with net interest income rising 2.6% to $48 million. The bank also declared a quarterly dividend of $0.40 per share.
In terms of credit risk management, Great Southern Bank has seen a decrease in nonperforming assets to 0.13% of total assets. However, non-interest income saw a decrease of $860,000 from Q3 2023, primarily due to lower overdraft fees and debit card income. On the other hand, gains on loan sales rose by $292,000.
The bank's management remains focused on controlling costs and navigating a competitive deposit environment. They expect the effective tax rate to remain around 18.0% to 20.0%.
InvestingPro Insights
To complement Piper Sandler's analysis, recent data from InvestingPro offers additional context on Great Southern Bancorp's financial position. The company's P/E ratio stands at 11.49, aligning closely with the multiple used in Piper Sandler's price target calculation. This valuation metric suggests that the stock is trading at a reasonable level relative to its earnings.
InvestingPro Tips highlight that Great Southern Bancorp has maintained dividend payments for 35 consecutive years, demonstrating a strong commitment to shareholder returns. This track record of consistent dividends could be particularly appealing to income-focused investors, especially given the current dividend yield of 2.76%.
However, it's worth noting that the company's revenue growth has been negative, with a -7.43% decline in the last twelve months as of Q3 2024. This aligns with Piper Sandler's focus on loan growth and margin outlook in their analysis.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Great Southern Bancorp's financial health and prospects.
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