On Friday, Desjardins lowered its rating on shares of Toronto-Dominion Bank (TSX:TD:CN) (NYSE: TD) to Hold from Buy, adjusting its price target to C$80 from C$88. The revision follows a performance review in which the bank's cash earnings per share (EPS) and adjusted pre-tax, pre-provision (PTPP) earnings did not meet the analyst's expectations.
The report described the latest earnings as "very noisy," indicating a challenging and volatile period ahead for the bank's stock. According to InvestingPro data, TD shares are trading near their 52-week low of $52.75, with a year-to-date decline of 14.12%. Despite current challenges, the bank maintains a solid market position with a $92.19B market capitalization and a P/E ratio of 15.74.
The analyst from Desjardins highlighted that Toronto-Dominion Bank's stock is anticipated to remain within a certain trading range for the upcoming year. This projection is based on the expectation of continued volatility until the bank completes its strategic review and hosts an investor day later in the fiscal year 2025.
The strategic review's outcome is awaited to provide clearer direction on the bank's future. InvestingPro analysis reveals that while TD faces near-term headwinds, it maintains a strong dividend yield of 5.65% and has maintained dividend payments for 52 consecutive years. Subscribers can access 8 additional ProTips and comprehensive financial metrics through the Pro Research Report.
In response to the bank's recent performance, Desjardins has revised its cash EPS estimates for Toronto-Dominion Bank. These new estimates are detailed in a sidebar referenced by the analyst, though the specifics were not disclosed in the provided context.
The price target adjustment to C$80 reflects a reduction from the previous target of C$88. This change in the target price is a direct consequence of the revised cash EPS estimates and the anticipation of a range-bound stock influenced by potential volatility and the pending strategic review.
The analyst's final comment emphasized the decision to downgrade the stock to Hold from Buy. The change in recommendation suggests a more cautious approach to investing in Toronto-Dominion Bank shares until there is more clarity on the bank's strategic direction and financial performance.
In other recent news, Toronto-Dominion Bank (TD Bank) has experienced a dip in its Q4 earnings, falling short of analyst expectations.
The bank reported adjusted earnings per share of C$1.72, missing the consensus estimate of C$1.83. On the other hand, it did surpass revenue expectations, bringing in C$15.51 billion, a 33% rise YoY, exceeding the projected C$12.71 billion.
The bank's adjusted net income decreased by 8% YoY to C$3.21 billion, due to increased provisions for credit losses and higher expenses. Despite these challenges, the Canadian Personal and Commercial Banking segment saw a 9% increase in net income to C$1.82 billion.
However, the U.S. Retail Bank segment experienced a 12% decline in adjusted net income to US$689 million. This was attributed to higher credit losses and expenses, along with a C$311 million charge related to restructuring its U.S. balance sheet.
In terms of future prospects, TD Bank has indicated that earnings growth may be challenging in fiscal 2025 due to a "transition year" and investments in risk management and control infrastructure. The bank has suspended its medium-term financial targets, with plans to provide updated goals in the second half of 2025.
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