On Friday, U.S. Bancorp (NYSE: USB) shares experienced a setback as UBS adjusted its price target to $43.00, down from the previous $47.00, while keeping a Neutral stance on the stock. The revision followed U.S. Bancorp's underperformance earlier in the week, specifically on Tuesday, when its shares fell by 3.6%. This contrasted with the BKX Bank Index, which closed up 0.7% on the same day.
The price target adjustment came after U.S. Bancorp revised its full-year pre-provision net revenue (PPNR) outlook. The bank cited a shift toward noninterest bearing deposits that was greater than anticipated, leading to a downward revision of its net interest income (NII).
Market participants were caught off guard by the change, especially since no other banks, even those considered more vulnerable, such as Citizens Financial (NYSE:CFG) Group, KeyCorp (NYSE:KEY), and Comerica (NYSE:CMA), have adjusted their NII forecasts for the year.
The unexpected revision so soon after U.S. Bancorp had suggested a $16.6 billion-plus NII during its first-quarter conference season has raised concerns among investors. According to UBS, this could potentially hinder the bank's multiple expansion. Investors are now expected to closely monitor deposit trends before feeling confident about the bank's updated guidance, particularly in an environment where interest rates remain elevated.
In response to the revised outlook, UBS has also adjusted its earnings estimates for U.S. Bancorp for the years 2024 and 2025, bringing them down to $3.80 and $4.15 per share from the previous forecasts of $3.87 and $4.45, respectively.
Additionally, the target tangible book value (TBV) multiple has been reduced to 1.8 times from 1.9 times, reflecting a lower return on tangible common equity (ROTCE). Despite these changes, UBS maintains its Neutral rating on U.S. Bancorp stock.
InvestingPro Insights
As U.S. Bancorp (NYSE: USB) navigates the challenges of revised revenue forecasts and interest rate uncertainties, investors may benefit from additional context provided by InvestingPro data and tips. The bank's resilience is highlighted by its consistent dividend history, having raised its dividend for 13 consecutive years and maintained payments for 54 years. This commitment to shareholders is underscored by a solid dividend yield of 4.97% as of the first quarter of 2024.
InvestingPro data also reveals a market capitalization of $61.46 billion and a Price to Earnings (P/E) ratio of 13.12, which adjusts to 11.33 when looking at the last twelve months as of Q1 2024. This suggests a valuation that may be attractive to value investors. Additionally, the company's Price to Book (P/B) ratio stands at 1.26, potentially indicating that the stock is trading at a reasonable price relative to its book value.
Investors considering U.S. Bancorp can access further insights on InvestingPro, where they'll find over 7 additional InvestingPro Tips for a deeper analysis. For those looking to make the most of these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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