On Friday, Keefe, Bruyette & Woods adjusted its price target on shares of ConnectOne Bankcorp (NASDAQ:CNOB), reducing it to $24.00 from the previous $27.00.
Despite the decrease, the firm maintained its Outperform rating on the stock. The adjustment follows ConnectOne Bankcorp's report of a first-quarter operating earnings per share (EPS) of $0.41, which fell slightly short of expectations. The shortfall was attributed to a more pronounced than anticipated net interest margin (NIM) compression.
The financial institution's core pre-provision net revenue (PPNR) did not meet Keefe, Bruyette & Woods' estimate by $0.03. Nonetheless, other significant financial metrics aligned with projections. Notably, the bank exhibited robust credit performance. Nonperforming assets (NPAs) saw a quarter-over-quarter decrease of 10%, and net charge-offs (NCOs) were reported at a minimal 0.15%.
Management at ConnectOne Bankcorp is reportedly prioritizing high-quality relationships and moderate growth in the near term. This strategy has led to a revision of the firm's estimates downward, primarily due to a projected weaker net interest income (NII). Keefe, Bruyette & Woods suggests that while this has influenced the reduction in the price target, the current net interest margin and earnings may represent a low point.
The firm expressed a positive outlook, indicating that despite the adjustments, the risk/reward balance for investors remains favorable. This stance is based on the bank's discounted valuation, suggesting potential for future gains. The firm reiterated its Outperform rating, signaling confidence in ConnectOne Bankcorp's strategic approach and its potential benefits for shareholders.
InvestingPro Insights
As ConnectOne Bankcorp navigates a period of financial recalibration, real-time data from InvestingPro offers additional context for investors. The company's market capitalization stands at $706.64 million, with a P/E ratio of 10.45, reflecting a valuation that may appeal to value-oriented investors. Despite a decrease in revenue over the last twelve months by 14.38%, ConnectOne Bankcorp has maintained a strong operating income margin of 48.58%. This suggests that while top-line growth has been challenged, the company has been efficient in managing its operations.
InvestingPro Tips reveal that ConnectOne Bankcorp has a history of rewarding shareholders, raising its dividend for 5 consecutive years, and maintaining dividend payments for an impressive 51 consecutive years. This consistent return to shareholders is noteworthy, especially in light of the 3.68% dividend yield as of the first quarter of 2024. While analysts have revised their earnings expectations downwards for the upcoming period and anticipate a drop in net income this year, it's important to note that the company has been profitable over the last twelve months and is expected to remain profitable this year.
For those seeking a more in-depth analysis, InvestingPro provides further tips on the company's financial health and future prospects. Interested readers can unlock these insights and take advantage of the additional value by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. ConnectOne Bankcorp's strategic focus on high-quality relationships and moderate growth may well position it for recovery, aligning with the positive outlook expressed by Keefe, Bruyette & Woods.
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