On Tuesday, Piper Sandler adjusted its stance on Bank of Hawaii (NYSE:BOH), increasing the price target to $66 from $61, while maintaining an Underweight rating on the shares. The firm's analyst cited several model adjustments, including a leaner margin outlook and an expanded earning asset base, leading to stronger net interest income (NII).
The analyst also mentioned increased fee income and expense forecasts, along with lower provision assumptions. These changes, combined with the third-quarter results, prompted Piper Sandler to revise its earnings per share (EPS) estimates upwards for the coming years. The 2024 EPS estimate has been raised by $0.16 to $3.50, and the 2025 estimate by $0.07 to $3.45. Additionally, a 2026 EPS estimate of $4.20 was introduced, reflecting expectations of 6%-7% loan growth, continued margin expansion, stronger fee income, positive operating leverage, and excellent credit quality.
The new price target of $66 reflects a price-to-earnings (P/E) multiple of 19.1 times the 2025 EPS estimate, up from the previous multiple of 18.0. The adjustment in the price target is also influenced by higher peer multiples observed in the market.
Despite the upward revision in price target and EPS estimates, the Underweight rating remains based on valuation concerns. The analyst pointed out that the stock is currently trading at approximately 225% of tangible book value (TBV) and 21 times the firm's 2025 EPS estimate, which underpins the cautious investment rating.
In other recent news, Bank of Hawaii has reported a significant rise in net income of 18.4% from the previous quarter, surpassing analyst estimates. The bank recorded a net income of $40.4 million or $0.93 per diluted share, outperforming the expected earnings of $0.82 per share. Revenue for the bank amounted to $162.73 million, exceeding the consensus estimate of $160.3 million.
DA Davidson has expressed increased confidence in Bank of Hawaii's financial performance, lifting the price target to $74.00 from the previous $65.00, while maintaining a Neutral rating. This follows two consecutive quarters of rising net interest income (NII) and net interest margin (NIM), and strong fee income in the third quarter.
The bank's total loans and leases grew by 0.6% from the previous quarter to $13.9 billion, while total deposits saw an increase of 2.8% to $21.0 billion. Bank of Hawaii also maintained solid capital levels, with its Tier 1 capital ratio rising to 14.05% from 13.96% in the prior quarter. In addition, the bank declared a quarterly cash dividend of $0.70 per share, demonstrating its robust financial performance and commitment to shareholder returns.
InvestingPro Insights
Recent data from InvestingPro adds context to Piper Sandler's analysis of Bank of Hawaii (NYSE:BOH). The stock's P/E ratio stands at 19.82, aligning closely with the analyst's observation of it trading at 21 times the 2025 EPS estimate. This valuation metric supports the cautious Underweight rating despite the increased price target.
InvestingPro Tips highlight that Bank of Hawaii has maintained dividend payments for 53 consecutive years, a testament to its financial stability and commitment to shareholder returns. This track record may partially explain the premium valuation noted by Piper Sandler. Additionally, the stock has shown a significant return over the last week and a strong return over the last month, with InvestingPro data revealing a 15.92% price total return in the past month.
However, investors should note that net income is expected to drop this year, which could impact future valuations. For a more comprehensive analysis, InvestingPro offers 7 additional tips for Bank of Hawaii, providing deeper insights into the company's financial health and market position.
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