On Friday, Bread Financial Holdings (NYSE:BFH) saw its price target increased by BofA Securities from $46.00 to $54.00, while the firm maintained a Neutral rating on the company's stock. The adjustment follows Bread Financial's announcement of second-quarter earnings, which surpassed expectations in terms of both revenue and earnings per share (EPS).
The company reported a significant year-over-year increase in tangible book value of 25%, with most line items performing better than anticipated. Bread Financial posted an adjusted EPS of $2.66, which was notably higher than both the BofA estimate and the consensus, which stood at $1.91 and $1.81 respectively.
The higher price target reflects an acknowledgment of Bread Financial's robust operating performance. The analyst attributed the earnings beat to a combination of factors including higher revenue, which contributed $0.36 per share, reduced operating expenses (OpEx) adding $0.30 per share, and lower provisions for credit losses providing a $0.04 per share benefit.
Despite the positive results and the increased price objective, the analyst chose to retain a Neutral stance on Bread Financial's shares. This decision was based on a balanced view of the potential risks and rewards associated with the stock. The updated price target of $54.00 is now set to reflect the company's improved financial results and operational efficiency demonstrated in the second quarter.
In other recent news, Bread Financial reported a net income of $133 million in the second quarter of 2024, with earnings per diluted share of $2.66. This comes alongside a significant year-over-year increase in the company's tangible book value, and a robust growth in direct-to-consumer deposits. The company also announced partnerships with Saks Fifth Avenue and HP (NYSE:HPQ), with plans to complete the Saks portfolio conversion in the third quarter.
Despite a decrease in credit sales and revenue primarily due to lower merchant discount fees, Bread Financial anticipates a gradual improvement in consumer behavior over the next year. The company is also targeting to build total risk-based capital to around 16% and generate a low to mid-20% return on tangible common equity in the medium term.
These recent developments come amidst a dynamic macroeconomic environment and regulatory challenges. However, Bread Financial remains optimistic about achieving its long-term strategic goals and financial targets. The company's proactive approach to managing the macroeconomic and regulatory environment, strategic partnerships, and disciplined capital management position it well for future performance.
InvestingPro Insights
Bread Financial Holdings (NYSE:BFH) has demonstrated a strong operational performance, as highlighted by its recent earnings report. To further understand the company's financial health and market position, a look at the real-time data from InvestingPro provides additional insights. With a market capitalization of $2.6 billion and a notably low price-to-earnings (P/E) ratio of 5.16, Bread Financial is trading at a valuation that may attract investors looking for potentially undervalued stocks.
InvestingPro Tips suggest that analysts are optimistic about Bread Financial's prospects, with five analysts having revised their earnings upwards for the upcoming period. Moreover, despite weak gross profit margins, the company has maintained dividend payments for nine consecutive years, which could appeal to income-focused investors. Additionally, Bread Financial is trading near its 52-week high, reflecting a strong return over the last month of 3.17% and an impressive six-month price total return of 49.19%.
To explore more about Bread Financial's future performance and gain access to further InvestingPro Tips, interested readers can visit Investing.com. There are 11 additional tips available that can provide deeper insights into the company's stock. For those considering a subscription, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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