On Friday, DA Davidson increased the price target for South State Corporation (NYSE:SSB) shares to $112 from the previous $102 while reaffirming a Buy rating on the stock. The revision comes as a response to the bank's second-quarter performance and a stable outlook for the latter half of the year, contrasting with prior projections.
The firm has adjusted its earnings per share (EPS) estimates for South State for the years 2024 and 2025. The updated 2024 EPS forecast is now $6.67, up from the earlier estimate of $6.40, while the 2025 EPS estimate remains unchanged at $7.69. The positive adjustments for 2024 reflect the company's second-quarter performance and expectations of a steady performance in the coming months.
DA Davidson's decision to raise the price target is also influenced by the anticipated benefits of South State's pending acquisition of Independent Bank (NASDAQ:INDB) of Texas (IBTX), which is expected to yield a return on tangible common equity (ROTCE) of approximately 20%. The firm cites this strategic move as a factor that supports a strong return outlook for South State.
The analyst's commentary highlighted the rationale behind the optimistic stance on South State shares. The bank's high-quality franchise and the broader market's expansion of bank stock multiples were noted as contributing factors to the positive outlook. With the price target now set at $112, it represents a 2.2 times multiple on the bank's estimated tangible book value (TBV) for the fourth quarter of 2025.
In other recent news, SouthState Corporation reported a strong performance in the second quarter of 2024, with significant increases in net interest margin, 7% annualized loan growth, and controlled expenses.
The company's total revenue stood at $425 million, and it is planning an expansion into new markets via an independent transaction involving IBTX. A recent cyber incident cost the company $8 million, but insurance is expected to cover $6 million of these expenses.
The company's capital ratios have improved, with a TCE ratio of 8.4% and CET1 of 12.1%. Despite a challenging deposit environment, SouthState maintains high loan quality and stable deposit levels. The company's executives have provided strategies to manage deposit costs and capital in the current economic environment.
These recent developments reflect SouthState Corporation's focus on growth and market expansion, despite facing challenges such as a cyber event. The company's robust performance is underpinned by strong loan quality and a cautious yet bullish approach to commercial real estate lending.
InvestingPro Insights
Following DA Davidson's updated outlook on South State Corporation, real-time data from InvestingPro aligns with the firm's positive sentiment. The bank's market capitalization stands at a robust $7.41 billion, and its price-to-earnings (P/E) ratio is 15.53, reflecting a valuation that is in line with industry standards. Notably, the adjusted P/E ratio for the last twelve months as of Q2 2024 is slightly lower at 15.19, suggesting a stable earnings outlook.
InvestingPro Tips highlight the company's strong track record of dividend growth, with South State having raised its dividend for 28 consecutive years. Additionally, the stock has seen a significant return over the last month, with a 32.37% increase in price total return. This performance is indicative of the bank's robust financial health and the market's confidence in its growth trajectory. For investors seeking to delve deeper into South State's financials and future prospects, InvestingPro offers a wealth of additional tips to guide investment decisions.
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