On Thursday, BofA Securities increased its price target on shares of U.S. Bancorp (NYSE: USB) to $53.00, up from the previous $49.00, while reiterating a Buy rating on the stock.
The adjustment follows U.S. Bancorp's second-quarter earnings report, which saw the company's core earnings per share (EPS) reach $0.98, surpassing both BofA Securities' estimate and the consensus estimate of $0.96 and $0.93, respectively.
The bank's performance was attributed to stronger revenue growth, with net interest income (NII) and fees both rising by 1%. The firm noted this as a positive turnaround, especially after U.S. Bancorp's shares had previously underperformed following a reduction in its full-year 2024 net interest income guidance due to less favorable customer behavior than expected.
In light of the recent earnings report, BofA Securities has revised its full-year 2024 and 2025 EPS estimates upwards by 1%, citing a slightly improved revenue outlook. This revision is part of the rationale behind the increased price objective.
The new price target of $53 is based on forward-looking methodology, rolling from 2024 estimates to 2025 estimates. The valuation multiples applied by BofA Securities are 15.2 times the projected 2025 earnings per share and 1.5 times the projected year-end 2025 tangible book value, an update from the previous multiples of 13.5 times and 2.0 times, respectively. These figures reflect BofA Securities' anticipation of U.S. Bancorp's continued financial performance and growth.
In other recent news, U.S. Bancorp has seen significant developments. DA Davidson raised its price target for U.S. Bancorp shares from $44.00 to $49.00 based on improved net interest income and a forecast for better fee income growth in the latter half of 2024. However, JPMorgan downgraded U.S. Bancorp's stock to neutral due to increased capital requirements and the absence of a medium-term catalyst.
Conversely, Wells Fargo maintains an optimistic stance, predicting a 3% revenue growth for U.S. Bancorp this year, driven by a robust consumer segment and savings from merger synergies.
U.S. Bancorp also announced the departure of Tim Welsh, vice chair of Consumer and Business Banking, and the subsequent appointment of Arijit Roy to lead the Consumer and Business Banking products organization.
Furthermore, U.S. Bancorp saw significant changes within its Wealth, Corporate, Commercial, and Institutional Banking division, promoting Stephen Philipson and Felicia La Forgia to expanded roles.
The bank, along with others, is grappling with increased deposit costs and dampened loan demand due to the Federal Reserve's quantitative tightening measures. Despite these challenges, the investment banking sector has seen a surge in capital market fees. These are recent developments that investors should consider.
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