On Monday, DA Davidson updated its financial outlook on 1st Source Corporation (NASDAQ:SRCE), raising the price target to $64 from $62 while maintaining a Neutral rating on the stock. The adjustment follows the company's recent earnings report, which revealed a strong quarter with earnings of $1.41 per share, narrowly missing DA Davidson's estimate by $0.01 but surpassing the consensus estimate of $1.34.
The company's preprovision net revenue showed a notable increase of $1.5 million quarter-over-quarter, reaching $48.49 million. This figure exceeded DA Davidson's projection of $46.81 million, demonstrating effective expense management and consistent margin growth. However, these positive results were somewhat counterbalanced by a provision expense that was higher than anticipated.
Credit trends within 1st Source showed a mixed picture, but the overall outlook for the company remains positive. The analyst's decision to maintain the Neutral rating is based solely on the current valuation of the stock. The new price target of $64 reflects a target price-to-earnings (P/E) ratio of 11.5 times DA Davidson's 2025 earnings per share (EPS) estimate of $5.59. This estimate is significantly higher than the consensus estimate of $5.12, which the analyst believes is too low. The forecast for 2025 assumes a modest EPS growth rate of just 1%.
In other recent news, 1st Source reported a net income increase of 6.07% in the third quarter of 2024, amounting to $34.94 million. The company's diluted net income per common share also rose by 6.82% to $1.41. The Board of Directors approved a quarterly cash dividend of $0.36 per common share, marking a 12.50% increase from the previous year. Tax-equivalent net interest income for the third quarter reached $75.63 million, up 1.94% from the second quarter of 2024.
Investment firm Piper Sandler downgraded 1st Source stock from Overweight to Neutral, while increasing the price target to $67.50. This adjustment was made due to the stock's valuation after closing at an all-time high. Despite the downgrade, Piper Sandler maintains a positive outlook on 1st Source, noting its superior profitability and conservative credit profile.
In other company news, 1st Source's capital position remained robust, with a common equity-to-assets ratio of 12.60% as of September 30, 2024. The company also saw a slight decrease in average deposits by 0.69% from the previous quarter but witnessed a 2.65% increase compared to the same quarter in the previous year.
InvestingPro Insights
To complement DA Davidson's analysis, InvestingPro data offers additional insights into 1st Source Corporation's financial health. The company's P/E ratio stands at 10.96, which aligns closely with the target P/E of 11.5 set by DA Davidson. This suggests that the current market valuation is in line with analyst expectations.
1st Source Corporation has demonstrated a strong commitment to shareholder returns, with InvestingPro Tips highlighting that the company has raised its dividend for 31 consecutive years and maintained dividend payments for an impressive 50 consecutive years. This track record of consistent dividend growth, coupled with a current dividend yield of 2.51%, may appeal to income-focused investors.
The company's profitability is also noteworthy, with an operating income margin of 47.11% for the last twelve months as of Q3 2024. This robust margin supports the analyst's observation of effective expense management and margin growth.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights, with 6 more tips available for 1st Source Corporation on the platform.
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