On Thursday, Oppenheimer adjusted its stock price target for U.S. Bancorp (NYSE:USB), increasing it to $55.00 from the previous $53.00, while reaffirming an Outperform rating on the stock. The firm's analysis acknowledges U.S. Bancorp's consistent performance in maintaining some of the industry's top profitability metrics, specifically in terms of Return on Tangible Common Equity (ROTCE) over the last 18 months.
Despite the broader challenges in the banking sector and a significant reduction in the Factset 2024 consensus estimate, which dropped approximately 32% from $5.45 to $3.72 from early 2023 to the eve of the second quarter 2024 earnings day, Oppenheimer remains optimistic.
The firm notes that the Federal Reserve's rate hikes exceeded expectations and that the Silicon Valley Bank (SVB) collapse may have adversely affected customer and competitor behavior. Furthermore, U.S. Bancorp's performance may have been impacted by over-hedging against declining rates in late 2022 or by the Union acquisition not meeting expectations.
Oppenheimer has made slight adjustments to its earnings model for U.S. Bancorp, but maintains its bottom line estimate for 2025, which is close to the consensus of $4.21. The target price is based on a valuation of 80% of the equal-weighted S&P 500's multiple, leading to the $55 target. This adjustment comes after U.S. Bancorp's shares experienced a roughly 4% gain on earnings day, which was notably in contrast to the S&P 500's 1% decline.
The firm's positive outlook on U.S. Bancorp shares is rooted in the belief that there is still good upside potential for the stock, despite the array of challenges and adjustments that have affected the banking industry at large.
In other recent news, U.S. Bancorp has been the subject of several analyst adjustments following its strong second-quarter earnings report. RBC Capital Markets raised its price target to $48, citing the bank's consistent profitability and the successful completion of the Union Bank transaction.
Similarly, BofA Securities increased its price target to $53, attributing the decision to stronger revenue growth and revised full-year estimates. DA Davidson also raised its target to $49, highlighting improved net interest income and anticipated fee income growth.
In contrast, JPMorgan (NYSE:JPM) downgraded U.S. Bancorp to neutral due to increased capital requirements and the absence of a medium-term catalyst. However, Wells Fargo (NYSE:WFC) maintains an optimistic stance, predicting a 3% revenue growth for U.S. Bancorp this year.
U.S. Bancorp's leadership team also saw changes with Tim Welsh, vice chair of Consumer and Business Banking, announcing his departure. Arijit Roy will succeed Welsh, leading the Consumer and Business Banking products organization. Moreover, Stephen Philipson and Felicia La Forgia were promoted to expanded roles within the Wealth, Corporate, Commercial, and Institutional Banking division.
Lastly, U.S. Bancorp, along with other U.S. banks, is grappling with increased deposit costs and dampened loan demand due to the Federal Reserve's quantitative tightening measures. Despite these challenges, the investment banking sector has seen a surge in capital market fees. These are recent developments that investors should consider.
InvestingPro Insights
U.S. Bancorp's (NYSE:USB) resilience in the face of industry-wide challenges is further substantiated by its robust financial metrics and market performance. With a solid market capitalization of $70.63 billion and a P/E ratio that has improved to 13.22 in the last twelve months as of Q1 2024, the company demonstrates sound valuation levels.
Notably, U.S. Bancorp has a history of rewarding its shareholders, having raised its dividend for 54 consecutive years, a testament to its financial stability and commitment to shareholder returns, as reflected by a healthy dividend yield of 4.33%. Moreover, the company has delivered strong price total returns in the short term, with a notable 7.94% over the last week and an impressive 16.64% over the last month.
InvestingPro Tips highlight that U.S. Bancorp is a prominent player in the banking industry, which aligns with Oppenheimer's recognition of the company's top profitability metrics. Investors should note that the stock is trading near its 52-week high, currently at 98.71% of this peak, which could suggest confidence in its market position.
For those looking to delve deeper into U.S. Bancorp's potential, there are additional InvestingPro Tips available, offering insights such as analysts' earnings revisions and the stock's technical indicators. To explore these further, visit https://www.investing.com/pro/USB and consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With more tips available on InvestingPro, investors can make more informed decisions backed by comprehensive data and expert analysis.
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