On Friday, Maxim Group updated its outlook on Cullen/Frost Bankers (NYSE:CFR), increasing the price target to $149 from the previous $138 while sustaining a Buy rating on the stock. The adjustment follows the management's revised guidance for 2024, which included some minor positive changes.
In the updated guidance, the analyst noted that while there were some modest positives, they had to adjust the earnings per share (EPS) estimate for 2024 down to $8.85 from the earlier projection of $9.20. This reduction was attributed to a less bullish stance than the implied guidance on the fourth-quarter net interest margin (NIM) for 2024.
Despite the downward revision for 2024, the firm has increased its EPS estimate for 2025 to $10.00 from $9.75, citing expectations for a slightly wider NIM in 2025 compared to their previous estimates. This anticipated expansion in NIM has partially contributed to the raised price target.
The new price target of $149 is based on a valuation that is 14.9 times the updated 2025 EPS estimate. Previously, the valuation was pegged at 14.2 times the EPS estimate. The analyst justifies this premium valuation for Cullen/Frost Bankers by comparing it to another high-quality Texas-based bank, suggesting that the premium is warranted given the company's performance.
In other recent news, Cullen/Frost Bankers reported notable earnings and revenue results, with a year-over-year decrease in earnings from $160.4 million to $143.8 million, despite robust loan growth of over 11%. These developments follow the bank's strategic expansions in key Texas cities. In recent analyst evaluations, Stephens raised the bank's target to $136, maintaining an Equal Weight rating, following solid third-quarter results.
Meanwhile, Citi trimmed its price target for Cullen/Frost to $104, maintaining a Sell rating due to expectations of below-consensus earnings. Morgan Stanley downgraded the bank from Equalweight to Underweight due to valuation concerns but raised its price target to $121. RBC Capital adjusted its outlook on Cullen/Frost's shares, raising the price target to $120 from $119, while maintaining a Sector Perform rating.
InvestingPro Insights
Cullen/Frost Bankers' recent performance and financial metrics provide additional context to Maxim Group's updated outlook. According to InvestingPro data, the company's market capitalization stands at $8.15 billion, with a P/E ratio of 15.48 based on the last twelve months as of Q2 2024. This valuation is slightly lower than the 14.9 times 2025 EPS estimate used in Maxim Group's new price target, suggesting potential upside if the company meets expectations.
The bank's strong dividend history aligns with its stable financial position. An InvestingPro Tip highlights that Cullen/Frost has raised its dividend for 32 consecutive years, demonstrating a commitment to shareholder returns. This is further supported by a current dividend yield of 2.98% and a dividend growth rate of 9.2% over the last twelve months.
Despite the analyst's downward revision of 2024 EPS estimates, Cullen/Frost's financials show resilience. The company's revenue growth, although modest at 0.76% over the last twelve months, is complemented by a robust operating income margin of 37.6%. This efficiency is reflected in another InvestingPro Tip, which notes that the company has been profitable over the last twelve months.
For investors seeking more comprehensive analysis, InvestingPro offers 5 additional tips and a range of financial metrics to further evaluate Cullen/Frost Bankers' investment potential.
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