On Tuesday, Jefferies made adjustments to its outlook on Bread Financial Holdings (NYSE:BFH) shares, reducing the price target to $50 from $55 while keeping a Hold rating on the stock. The revision follows a recent discussion with the company, which anticipates a rise in the net charge-off (NCO) rate.
Management has confirmed the current third-quarter and full-year 2024 guidance with minor revisions but now expects an increase of approximately 75 basis points in NCOs in the first quarter of 2025, possibly marking the peak rate at around 9%.
The firm has updated its earnings per share (EPS) estimates for the fiscal years 2024 and 2025 to $7.46 and $5.02 respectively, based on the information provided during the call with Bread Financial. The change in the price target reflects these anticipated adjustments in the company's financial performance.
Bread Financial Holdings, which operates in the financial services sector, is navigating through an environment where roll rates are expected to remain high. Roll rates refer to the percentage of credit card users who roll over their unpaid balances from month to month, which can be an indicator of the consumers' financial stress and can affect the company's NCO rates.
The updated stock price target of $50, down from the previous target of $55, takes into account the potential challenges and the expected increase in NCOs. Despite these concerns, Jefferies has chosen to maintain a neutral Hold rating on Bread Financial Holdings, suggesting a cautious approach to the stock at this time.
Investors will be watching closely as Bread Financial approaches the first quarter of 2025, which is now anticipated to be a critical period for the company's NCO rate. The firm's current guidance and adjustments are key factors for shareholders and potential investors to consider in their assessment of the company's future financial health.
In other recent news, Bread Financial Holdings, Inc. has experienced an increase in its net loss rate and delinquency rate for the months ending August and July 2024. The company attributes these changes to a revised calculation method introduced in January 2024, which aligns more closely with industry practice. Despite these challenges, Bread Financial continues to focus on creating opportunities for customers and partners through its digital-first approach, data insights, and white-label technology.
RBC Capital and BofA Securities have both adjusted their outlooks on Bread Financial following the company's second-quarter earnings report, which exceeded expectations with a net income of $133 million and an adjusted earnings per share of $2.66. RBC Capital increased the price target to $58 from the previous $47, while BofA Securities raised the price target from $46.00 to $54.00. Both firms maintained their respective Sector Perform and Neutral ratings on the stock.
In addition to its earnings performance, Bread Financial has announced strategic partnerships with Saks Fifth Avenue and HP (NYSE:HPQ), with plans to complete the Saks portfolio conversion in the third quarter. Despite these recent developments, Bread Financial anticipates a gradual improvement in consumer behavior over the next year, amidst a dynamic macroeconomic environment and regulatory challenges.
InvestingPro Insights
As investors digest the revised outlook from Jefferies on Bread Financial Holdings (NYSE:BFH), it's important to consider the current financial metrics provided by InvestingPro. With a market capitalization of $2.53 billion and a notably low P/E ratio of 5.25, the company presents an interesting valuation profile. The adjusted P/E ratio for the last twelve months as of Q2 2024 is slightly lower at 5.18, reinforcing the notion that the stock is trading at a low earnings multiple.
Despite a revenue contraction of 8.38% in the same period, Bread Financial has maintained a robust operating income margin of 23.77%, which may appeal to investors looking for operational efficiency. These financials are complemented by a strong return over the last year, with a 51.98% price total return, and a significant price uptick of 44.21% over the last six months. This performance, alongside a consistent dividend payout for 9 consecutive years, currently yielding 1.65%, may offer a degree of stability and income for shareholders.
InvestingPro Tips suggest that while the company suffers from weak gross profit margins, analysts predict profitability for this year, which is substantiated by the company's profitability over the last twelve months. For those considering Bread Financial Holdings' stock, there are additional insights and tips available, with 10 more InvestingPro Tips to explore, providing a deeper dive into the company's financial health and stock performance.
For a more comprehensive analysis and additional InvestingPro Tips, interested parties can visit the dedicated page for Bread Financial Holdings at https://www.investing.com/pro/BFH.
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