On Monday, Piper Sandler adjusted its outlook on Horizon Bancorp (NASDAQ:HBNC) shares, the holding company for Horizon Bank, reducing the price target to $13 from the previous $14 while maintaining a Neutral rating. The firm's decision follows Horizon Bancorp's first-quarter performance, which presented a mix of slower-than-expected revenue growth and well-managed operating expenses.
The company made strides in reallocating excess liquidity after a balance sheet restructuring in late fourth-quarter, but the move to purchase loans in the first quarter rather than preserving excess liquidity for potential organic loan growth within its existing footprint and core clients appeared to leave investors wanting.
The analyst noted that Horizon Bancorp's profitability might stay below optimal levels until there is clearer insight into the timing of Federal Reserve rate cuts due to the bank's sensitivity to liabilities on its balance sheet.
In light of these factors, Piper Sandler has revised its earnings per share (EPS) estimates for Horizon Bancorp for the years 2024 and 2025. The estimates have been decreased by 3% and 5% to $1.35 and $1.65, respectively. This adjustment is based on expectations of reduced fee income from mortgage-related activities and postponed growth in net interest income (NII).
The new price target of $13 still implies a valuation of 8.0 times the firm's projected 2025 earnings per share, which is in line with a modest discount compared to peers, who on average trade at 8.7 times earnings. This valuation reflects Horizon Bancorp's slightly below-average profitability outlook, with projected returns on assets (ROA) of 0.8% and 0.9% for 2024 and 2025, respectively.
InvestingPro Insights
As Horizon Bancorp navigates a challenging financial landscape, real-time data from InvestingPro provides further context to the company's current position. With a market capitalization of $514.39 million and a P/E ratio standing at 21.43, Horizon Bancorp's valuation metrics suggest a cautious investor approach. The company's revenue has seen a decline of 23.84% over the last twelve months as of Q1 2024, indicating potential headwinds in its operational performance.
From an investment standpoint, two InvestingPro Tips stand out: Horizon Bancorp has a longstanding history of maintaining dividend payments, with dividends raised for 8 consecutive years and maintained for 38 years, which could appeal to income-focused investors. Additionally, despite recent price volatility, with a significant drop over the last three months, analysts predict the company will remain profitable this year, which may provide some reassurance amidst market uncertainty.
For those considering a deeper dive into Horizon Bancorp's investment profile, InvestingPro offers additional insights and analytics. Subscribers can access more InvestingPro Tips to better inform their investment decisions. To enhance the value of your research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Note that there are 6 more InvestingPro Tips available for Horizon Bancorp that could provide a more comprehensive view of the company's potential.
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