On Friday, Stephens raised the price target for Citizens Financial Group (NYSE: NYSE:CFG) to $42.00, up from the previous $40.00, while reaffirming an Overweight rating on the stock.
The adjustment follows Citizens Financial's recent earnings report, where the bank posted a core EPS of $0.82, surpassing the consensus by $0.02. The operating pre-provision net revenue (Op. PPNR) also exceeded expectations by approximately 2%, bolstered by strong fee income trends.
The report highlighted a significant 52% year-over-year increase in capital markets, aligning with Stephens' 2024 model that anticipates a 45% year-over-year growth in this area.
Despite a modest uptick in net charge-offs and non-accrual loans on a quarter-over-quarter basis, Citizens Financial maintains a robust capital position, with a Common Equity Tier 1 (CET1) ratio of 10.7%. This strong capital footing enabled the bank to execute a $200 million buyback in the last quarter, with expectations to continue the trend into the third quarter of 2024.
Stephens noted several key growth drivers for Citizens Financial, including the expansion of its Private Bank and its operations in the Metro New York City area, as well as a resurgence in capital markets activities.
The analyst pointed out that more than a third of the $4 billion in deposits held in the Private Bank are in demand deposit accounts (DDA), emphasizing the potential for revenue growth.
The current valuation of Citizens Financial shares, trading at 11.0 times the projected 2025 earnings per share (EPS) and 1.3 times the tangible book value (TBV), was also mentioned as a factor in maintaining the Overweight rating.
With these considerations, Stephens has set the new price target at $42, indicating confidence in the bank's revenue growth prospects and capital management strategies.
In other recent news, Citizens Financial Group reported robust Q2 2024 earnings, revealing an EPS of $0.82, which surpassed the consensus estimate of $0.79. The bank's revenue results were also strong, featuring a net interest margin of 2.91% and a 3% growth in fees.
The company's strategic acquisitions of HSBC and ISBC, along with the establishment of Citizens Private Bank, have been recognized as crucial steps towards enhancing profitability and driving growth.
Several analysts have adjusted their outlook on Citizens Financial following these results. Baird increased the company's shares price target to $46.00 while maintaining an Outperform rating. RBC Capital Markets raised their price target for the bank to $43, maintaining an Outperform rating. DA Davidson lifted their target to $46 from $41, upholding a Buy rating, and Morgan Stanley raised their target from $38 to $41, maintaining an Equalweight rating on the stock.
The company also announced a series of leadership transitions, including the resignation of Jack Read, the Corporate Controller and Chief Accounting Officer, with John F. Woods serving as the interim replacement. Additionally, Jim Weiss has been appointed as the new Florida market president.
InvestingPro Insights
Following the positive outlook from Stephens, InvestingPro data further supports the potential of Citizens Financial Group (NYSE: CFG). With a market capitalization of $18.46 billion and a price-to-earnings (P/E) ratio standing at 14.59, the bank shows a solid financial stature. The P/E Ratio has adjusted slightly lower to 14.12 over the last twelve months as of Q1 2024, which could indicate a more attractive valuation for investors considering the bank's earnings potential.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, suggesting confidence in the bank's financial performance. Additionally, Citizens Financial has demonstrated a commitment to rewarding shareholders by maintaining dividend payments for 11 consecutive years, with a notable dividend yield of 4.12% as of the latest data. For readers interested in further insights, there are additional InvestingPro Tips available, which can be accessed with the coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
The bank's recent price performance also paints a bullish picture, with a 1-month price total return of 17.2% and reaching 97.16% of its 52-week high. These figures align with the strong return over the last month and three months, as noted in the InvestingPro Tips. For investors seeking a comprehensive analysis, the full list of InvestingPro Tips, which includes insights on profitability and stock performance, can provide a deeper understanding of Citizens Financial's market position.
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