On Thursday, Raymond (NS:RYMD) James upgraded U.S. Bancorp (BVMF:USBC34) (NYSE:USB) stock from Market Perform to Outperform, setting a price target of $57.00. The financial institution has surpassed earnings forecasts for two consecutive quarters following a period of consistent negative EPS revisions.
This performance comes after a promising Investor Day held on September 2024, which has since seen the company's stock move in parallel with the Bank Index (BKX) after a significant underperformance in the first half of 2024.
The bank, despite a history of negative operating leverage over the past several years, is anticipated to achieve positive operating leverage in 2025 and 2026. With an initial outlook for 2025 expected to be more conservative, the bank's fundamental momentum is likely to be sustained. This includes a stable-to-rising net interest margin (NIM) and increased fee-based revenue from payments and investment management services.
U.S. Bancorp has demonstrated the ability to rapidly bolster its capital reserves, and it has strategically planned to avoid reaching Category II bank status—which entails having assets above $700 billion—until at least 2027. This has allowed for a resumption of share repurchases in the fourth quarter at levels higher than anticipated, with expectations for this trend to continue.
The bank's diverse business mix is seen as a strength that will contribute to improved operating leverage and superior profitability metrics. U.S. Bancorp is considered to be in a "show-me" phase, where its performance and strategic decisions are closely watched by investors and analysts.
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