On Tuesday, RBC Capital Markets adjusted its outlook on Berkshire Hills Bancorp (NYSE:BHLB), reducing the price target from $32.00 to $31.00 while keeping a Sector Perform rating on the stock. Currently trading at $29.87 with a market capitalization of $1.26 billion, the stock has shown remarkable momentum with a 43.76% return over the past six months.
According to InvestingPro data, analyst price targets for BHLB range from $29 to $39. The adjustment follows the announcement of a merger between Berkshire and Brookline, which is anticipated to significantly expand their scale throughout the Northeast. Furthermore, Berkshire Hills Bancorp is set to raise $100 million in common equity in relation to the merger.
The analyst at RBC Capital highlighted the potential for the merger to enhance long-term efficiency and profitability due to the synergies expected between the two companies. InvestingPro analysis reveals that BHLB has maintained dividend payments for 25 consecutive years, currently offering a 2.41% yield, demonstrating a strong track record of shareholder returns.
The financial terms of the deal were also deemed attractive. Despite Berkshire Hills Bancorp being modeled on a stand-alone basis for the time being, due to Brookline being the accounting acquirer, the analyst has fine-tuned the forward estimates in light of the announced equity raise.
The revised estimates for Berkshire Hills Bancorp's earnings per share (EPS) reflect the implications of the common equity raise. The forecast for 2024 has been adjusted from $2.21 to $2.19, for 2025 from $2.50 to $2.30, and for 2026 from $2.90 to $2.65. These updated projections are a direct response to the financial dynamics introduced by the upcoming merger and the associated equity financing.
The price target adjustment to $31.00 from the previous $32.00 is a reflection of the new financial landscape for Berkshire Hills Bancorp as it prepares to integrate with Brookline. The Sector Perform rating indicates that RBC Capital Markets views the stock as likely to perform in line with the sector average in the near future.
Based on InvestingPro's comprehensive Fair Value analysis, BHLB is currently trading near its Fair Value. Subscribers can access 6 additional ProTips and detailed financial metrics through InvestingPro's extensive research platform.
In other recent news, Berkshire Hills Bancorp has been making significant strides in its business operations. The company was recently upgraded from Neutral to Buy by Seaport Global Securities following an announcement that Berkshire Hills Bancorp will acquire Brookline Bancorp (NASDAQ:BRKL) in an all-stock merger valued at approximately $1.14 billion.
The merger, expected to close in the second half of 2025, will result in a combined entity with $24 billion in assets and $18 billion in deposits.
Additionally, Berkshire Hills Bancorp has increased its capital by $100 million, which will alter the post-merger ownership structure. The leadership of the combined entity will consist of David Brunelle as Chairman from BHLB, with Paul Perrault serving as President & CEO, and Carl Carlson as CFO & CSO, both from BRKL.
Berkshire Hills Bancorp has also reported strong financial results in the third quarter of 2024, with operating earnings of $24.8 million. The bank projects the net interest margin (NIM) to be between 3.10% and 3.20% in Q4 2024.
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