On Tuesday, Piper Sandler adjusted its outlook on Guaranty Bancshares, Inc. (NASDAQ:NYSE:GNTY), reducing its price target to $30 from the previous $34, while keeping a Neutral stance on the stock.
The revision reflects a change in the firm's earnings estimates for 2024 and 2025, now set at $2.15 and $2.23 per share respectively, down from $2.23 and $2.51.
"We are lowering our '24/'25 estimates ...largely due to softer NII on a smaller balance sheet and fewer rate cuts," said analysts.
The firm acknowledged that increased share buyback activities by Guaranty Bancshares could partially mitigate these impacts, and it noted that the company's expense management is likely to remain effective. Despite these challenges, Piper Sandler believes that Guaranty Bancshares is in a good position to achieve further net interest margin (NIM) expansion moving forward. The potential for rate cuts is seen as a catalyst for accelerated NIM growth.
However, the firm expressed caution regarding the average earning assets (AEA) base, citing management's comments on the difficulties in loan growth after a roughly 10% annualized decline in balances during the first quarter. Piper Sandler is not overly concerned about a $14.9 million commercial real estate project that was transferred to Other Real Estate Owned (OREO) this quarter, but it recognizes that this situation presents a less favorable view of the stock until it is resolved.
The new price target of $30 is based on approximately 13.5 times Piper Sandler's 2025 earnings estimate. The firm's neutral rating indicates that it does not see significant upside or downside potential for Guaranty Bancshares' stock at this time.
InvestingPro Insights
Delving into the financial metrics of Guaranty Bancshares, Inc. (NASDAQ:GNTY), we uncover a mixed financial landscape. A notable highlight is the company's commitment to shareholder returns, as evidenced by the fact that GNTY has raised its dividend for seven consecutive years, with a current dividend yield of 3.27%. This, paired with a dividend growth of 9.09% over the last twelve months as of Q1 2023, suggests a robust approach to rewarding investors.
On the valuation front, GNTY presents an attractive P/E ratio of 7.48, which is lower than the adjusted P/E ratio of 11.08 for the last twelve months as of Q4 2023. This could indicate that the stock is currently undervalued. Moreover, the company has maintained profitability over the last twelve months, aligning with analysts' predictions that it will remain profitable this year.
However, investors should be aware of the challenges facing the company. Guaranty Bancshares suffers from weak gross profit margins, and net income is expected to drop this year, which may raise concerns regarding future profitability. Additionally, the company has experienced a revenue decline of 7.49% over the last twelve months as of Q4 2023, reflecting potential headwinds in its operational performance.
For readers seeking a deeper analysis, there are additional InvestingPro Tips available which could provide further insights into GNTY's financial health and future outlook. By using the 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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