On Friday, Keefe, Bruyette & Woods maintained a Market Perform rating on Alerus Financial Corp . (NASDAQ: NASDAQ:ALRS) with a steady price target of $22.00.
The firm's stance comes in light of Alerus Financial's recent announcement to extend its market presence through the acquisition of HMN Financial, a financial institution with a significant number of branches across Minnesota and single branches in both Wisconsin and Iowa.
As of March 31, 2024, HMN Financial reported having $1.2 billion in assets, $872.3 million in loans, and $1.0 billion in deposits. The all-stock transaction, valued at $116.4 million, prices HMN Financial shares at 107% of tangible book value (TBV), 20 times last twelve months' earnings per share (LTM EPS), which drops to approximately 8.9 times with anticipated cost savings, and includes a roughly 1% core deposit premium.
The acquisition by Alerus Financial is seen in a positive light, with expectations of significant accretion to earnings, potentially upwards of 45% once full integration is achieved. The time frame for the TBV dilution earn back is projected at approximately 2.2 years, with an immediate 11% impact at the time of closing.
With the deal expected to close late in 2024, Keefe, Bruyette & Woods has raised its earnings estimates for Alerus Financial for the year 2025 and has also introduced an earnings estimate for 2026.
InvestingPro Insights
As Alerus Financial Corp. (NASDAQ: ALRS) moves forward with its strategic acquisition of HMN Financial, investors and analysts are closely monitoring the company's financial health and growth prospects. According to InvestingPro data, Alerus Financial currently holds a market capitalization of $389.4 million and trades at a P/E ratio of 39.2 based on the last twelve months as of Q1 2024. Despite a revenue decline of 20.65% during the same period, the company's commitment to shareholder returns is evident, with a dividend yield of 3.85% and a history of increasing dividends for 40 consecutive years, an InvestingPro Tip that underscores the company's financial discipline and investor-friendly approach.
Moreover, analysts predict a profitable year ahead for Alerus Financial, another InvestingPro Tip that aligns with the positive outlook shared by Keefe, Bruyette & Woods. While three analysts have revised their earnings estimates downwards for the upcoming period, the company's ability to maintain profitability over the last twelve months and its anticipation of net income growth this year provide a counterbalance to concerns over its high earnings multiple and weak gross profit margins.
For investors seeking more in-depth analysis and additional insights, there are PRONEWS24 more InvestingPro Tips available for Alerus Financial Corp. These tips can offer valuable guidance for those considering an investment in the company. To access these tips and take advantage of a special offer, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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