Monday, shares of First Busey (NASDAQ:BUSE), a regional bank with a market capitalization of $1.33 billion, witnessed a price target adjustment from DA Davidson, with analysts revising their outlook to $26.00 from the previous $27.00, while maintaining a Neutral rating on the stock.
According to InvestingPro data, the stock appears undervalued based on its Fair Value analysis, with analyst targets ranging from $28 to $34. The change in valuation follows the company's recent earnings report, which, according to DA Davidson, was characterized by an earnings per share (EPS) beat primarily attributed to clean credit.
The firm noted that First Busey's solid asset quality trends permitted a reduction in provision expenses, compensating for the stagnant spread income figures.
DA Davidson analysts pointed out that while revenue growth did not surpass expectations, the clean credit situation played a significant role in the company's performance. The reduced provision expenses were a key factor in the EPS beat, indicating that the company's financial health remains stable, despite a lack of revenue growth surprises. Notably, First Busey has maintained dividend payments for 36 consecutive years, currently offering a 4.12% yield, demonstrating long-term financial stability.
Looking ahead, the analysts anticipate that First Busey's growth engine will gain momentum in 2025. They also expect fee income diversity to contribute positively to the company's financials. However, DA Davidson has adjusted its EPS estimate for 2025 downward, citing lower loan balances at the start of the year as the main reason for the revision.
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In their commentary, DA Davidson analysts stated, "In our view, BUSE posted an EPS beat largely on clean credit rather than a growth/revenue upside surprise. Good asset quality trends allowed for reduced provision expense, more than offsetting flat spread income results.
The growth engine should pick up steam in 2025 and fee income diversity will also be a contributor. We have lowered our EPS estimate in 2025 based on lower loan balances headed into the year. We rate the shares NEUTRAL with a revised $26 PT."
The revised price target of $26 reflects DA Davidson's updated expectations for First Busey's financial performance and stock valuation, taking into account the factors that have influenced their analysis. The stock currently trades at a P/E ratio of 11.72, with technical indicators suggesting oversold conditions according to InvestingPro analysis.
In other recent news, First Busey Corporation reported favorable earnings results, primarily driven by clean credit. This positive financial performance was complemented by the company's declaration of a quarterly cash dividend of $0.24 per share.
Furthermore, First Busey announced a merger with CrossFirst Bankshares (NASDAQ:CFB), a significant development set to add $7.6 billion in assets, $6.3 billion in loans, and $6.7 billion in deposits to its portfolio.
Analysts from DA Davidson and Stephens have adjusted their stock price targets for First Busey in light of these recent developments. While DA Davidson maintained a neutral stance, reducing its price target to $26 from $27, Stephens downgraded the stock from Overweight to Equal Weight and lowered the price target to $27 from $28. Piper Sandler, however, has continued to maintain an Overweight rating on First Busey shares.
These recent events reflect First Busey Corporation's strategic growth and commitment to shareholder value. The merger with CrossFirst Bankshares, estimated at approximately $916.8 million, is expected to enhance First Busey's competitive edge in the banking sector, particularly in wealth management offerings. Upon completion in 2025, the combined entity is projected to operate with approximately $20 billion in assets, $15 billion in loans, and $17 billion in deposits.
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