On Monday, Keefe, Bruyette & Woods adjusted their outlook on California BanCorp (NASDAQ: CALB), reducing the price target to $23 from the previous $23.50. Despite this change, the firm upheld an Outperform rating for the bank's stock.
The revision follows California BanCorp's first-quarter financial performance, which surpassed Keefe, Bruyette & Woods' expectations but fell short of the general market consensus.
A lower provision for credit losses contributed to the positive results, helping to counterbalance a shortfall in net interest income (NII). The bank's net interest margin (NIM) saw a marginal increase of one basis point from the previous quarter, reaching 3.89%. However, a reduction in the size of the bank's balance sheet was responsible for the NII not meeting expectations.
The firm anticipates that the NIM will stay relatively stable in the current economic climate. Credit metrics reported by California BanCorp were noted as clean. In their earnings release, California BanCorp mentioned that its merger of equals with BCAL is expected to be finalized in the third quarter of 2024.
Keefe, Bruyette & Woods also revised their earnings estimates for California BanCorp for the years 2024 and 2025. The new estimates are set at $2.12 and $2.05 per share, respectively, mainly due to the projected lower NII resulting from the bank's smaller balance sheet. The updated $23 price target is based on the exchange ratio of the impending deal with BCAL, in relation to BCAL's current stock price.
InvestingPro Insights
As California BanCorp (NASDAQ: CALB) navigates through the current economic landscape and the upcoming merger with BCAL, investors may find the following metrics and tips from InvestingPro valuable. The company's market capitalization stands at a modest $183.24M, and it boasts a price-to-earnings (P/E) ratio of 9.16, indicating a potentially undervalued stock relative to earnings. Despite a slight negative revenue growth over the last twelve months as of Q1 2024, the operating income margin remains robust at 37.95%, signaling efficient management operations.
InvestingPro Tips highlight that analysts are concerned about the company's weak gross profit margins and have revised their earnings downwards for the upcoming period, which could be a cautionary signal for investors. On a brighter note, the company has been profitable over the last twelve months, and analysts predict profitability will continue this year. It's worth noting that CALB does not distribute dividends, which could influence the investment strategy for income-focused shareholders.
For those interested in further analysis, InvestingPro offers additional tips that could provide deeper insights into California BanCorp's financial health and future prospects. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and access these valuable tips. Currently, there are 4 more InvestingPro Tips available for CALB at https://www.investing.com/pro/CALB, which could help investors make more informed decisions.
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