On Monday (NASDAQ:MNDY), Piper Sandler adjusted its outlook on shares of Newtek Business (NASDAQ:NEWT) Services Corp (NASDAQ:NEWT), increasing the price target to $15.00 from the previous $13.00 while maintaining a Neutral rating on the stock. This change comes after NewtekOne reported earnings per share (EPS) of $0.45, surpassing both the consensus estimate of $0.43 and Piper Sandler's own estimate of $0.41.
The company has confirmed its EPS guidance for 2024 to be between $1.85 and $2.05. Furthermore, Newtek has introduced its EPS guidance for 2025, projecting a range of $2.00 to $2.25. This forecast is ahead of both the analyst's earlier estimate and the general market expectations.
During the earnings call, Newtek's management expressed confidence in achieving the upper end of the 2024 guidance. In response to the company's performance and its future outlook, Piper Sandler has revised its core EPS estimates for 2024 and 2025 upwards to $1.98 and $2.15, respectively, from the previous estimates of $1.88 and $2.01.
The new price target of $15 is based on a consistent 7x multiple applied to the firm's increased 2025 EPS estimate. This revision reflects the firm's positive view on Newtek's earnings potential and financial projections for the coming years.
In other recent news, NewtekOne posted impressive Q3 results, with earnings per share (EPS) of $0.45, surpassing the predicted consensus of $0.43. Significantly, the company's leadership confirmed its 2025 EPS guidance range of $2.00 to $2.25.
Key metrics showed NewtekOne's solid financial health, with a return on average assets of 2.8% and a net interest margin of 5.29%, outperforming industry counterparts. The company also recorded a 12% growth in deposits and a 17% increase in loans.
NewtekOne's payment processing segment saw a pre-tax income rise of 32.5% to $5.3 million for the quarter. The company is in the process of merging its technology unit, NTS, into Paltalk, with completion expected in Q1 2024. However, it is important to note that the bank's net charge-offs increased to 104 basis points from 54 basis points last quarter.
These recent developments indicate a robust financial position for NewtekOne. As the company transitions into a financial holding company, it projects a diluted EPS for 2025 in the range of $2.00 to $2.25, and forecasts a $19.6 million figure for its payment processing segment in 2025. Despite some challenges, the company's strong financials and clear future vision position it well within the dynamic banking sector.
InvestingPro Insights
Recent data from InvestingPro adds depth to Piper Sandler's positive outlook on Newtek Business Services Corp (NASDAQ:NEWT). The company's P/E ratio of 8.47 suggests it may be undervalued relative to its earnings potential, aligning with Piper Sandler's increased price target. This is further supported by an InvestingPro Tip indicating that NEWT is trading at a low P/E ratio relative to its near-term earnings growth.
NEWT's financial health appears robust, with a strong return of 16.98% over the last three months and a significant 9.06% return just in the past week. These performance metrics underscore the market's positive reception of NEWT's recent earnings beat and optimistic guidance for 2024 and 2025.
Additionally, NEWT boasts a dividend yield of 5.4%, with an InvestingPro Tip highlighting that the company has maintained dividend payments for 10 consecutive years. This consistent dividend policy may appeal to income-focused investors and adds another layer of attractiveness to the stock.
For readers interested in a more comprehensive analysis, InvestingPro offers 7 additional tips for NEWT, providing a deeper understanding of the company's financial position and market performance.
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