On Thursday, Piper Sandler updated its outlook on Capitol Federal Financial (NASDAQ:CFFN), increasing the stock's price target to $7.00 from the previous $5.50, while the firm continued to hold a Neutral rating on the shares.
The adjustment follows Capitol Federal's recent earnings report for the third quarter of the fiscal year 2024, which revealed earnings per share (EPS) of $0.07. This figure did not meet the expectations set by Piper Sandler and the broader market consensus, falling short by $0.04.
The earnings miss was attributed primarily to a higher than anticipated tax rate, which impacted the company by $0.03 per share. The effective tax rate reached 38%, significantly higher than the 20% Piper Sandler had estimated. This increase in tax liabilities is due to the cash transfers from the bank to the holding company now being subject to federal taxes, in light of the anticipated taxable net loss in Capitol Federal's 2024 tax return.
In terms of Capitol Federal's fundamental performance, the net interest income (NII) was lower than Piper Sandler's forecast by $0.02 per share. This shortfall was a result of a combination of a reduced earning asset base and a narrower interest margin, which declined by 5 basis points to 1.77%, compared to the forecasted 1.82%.
On a positive note, the company managed to keep expenses below the anticipated levels by $0.01.
Additionally, Capitol Federal experienced a near 1% growth in loans, although deposits saw a slight decrease. Credit quality remained strong, and the efficiency ratio was stable at 62%, indicating consistent cost management.
These financial dynamics contribute to the overall assessment and expectations for the company's stock performance.
In other recent news, Capitol Federal Financial reported quarterly earnings of $0.11 per share, in line with both the consensus and analysts' expectations. The company's net interest margin saw an 11 basis point increase, reaching 1.82%, due to a securities restructuring undertaken in late 2023. However, Capitol Federal Financial experienced a 3% decline in loans, offset by an 8% increase in deposits from the last quarter.
Analysts from Keefe, Bruyette & Woods (KBW) have revised their fiscal year 2024 and 2025 earnings per share estimates for Capitol Federal Financial, reducing them by $0.02 for each year, and lowered the stock's price target to $6.00. Despite these adjustments, KBW maintains a Market Perform rating for the company.
Meanwhile, Piper Sandler also adjusted its price target for Capitol Federal Financial, lowering it from $6.00 to $5.50, while maintaining a Neutral rating. This adjustment follows the company's report of fiscal second-quarter 2024 earnings per share of $0.11, which was in line with Piper Sandler's estimate and the consensus among analysts.
InvestingPro Insights
In light of Capitol Federal Financial's (NASDAQ:CFFN) recent earnings report, it's pertinent to consider additional insights from InvestingPro that may impact investor perspectives. Despite the earnings miss, analysts are optimistic about CFFN's potential for sales and net income growth in the current year. Moreover, Capitol Federal has demonstrated a commitment to shareholders through its consistent dividend payments over the past 26 years.
InvestingPro Data highlights a strong return over the last month and three months, with a 24.76% and 33.27% total price return respectively. This performance may suggest a rebound in investor confidence following the recent earnings report. Additionally, the company boasts a significant dividend yield of 5.23%, which could appeal to income-focused investors. However, it is important to note that CFFN's P/E ratio is currently negative at -7.83, reflecting some investor skepticism regarding future earnings potential.
For investors seeking a more in-depth analysis, InvestingPro offers additional tips on Capitol Federal, which can be explored alongside real-time data metrics. To deepen your understanding of CFFN's investment potential and access a fuller range of analytical tools, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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