On Monday, Piper Sandler adjusted its outlook on 1st Source Corporation (NASDAQ:SRCE), a financial services company, by increasing its price target to $60 up from $59. The firm has maintained an Overweight rating on the stock. This change reflects a positive view of the company's first-quarter performance and future prospects.
According to the investment firm, 1st Source's first-quarter results were robust, displaying a 12% increase in pre-provision net revenue, driven by continued net interest margin expansion and strong cost control measures. The analyst highlighted the company's ability to grow net interest income, which is expected to surpass that of most peers, irrespective of the prevailing interest rate environment.
This growth is attributed to 1st Source's sustainable organic balance sheet growth, which is anticipated to contribute to exceptional operating leverage throughout the year.
The firm's analyst expressed confidence in 1st Source's financial health, citing the company's superior profitability profile. Despite some elevated non-core operating expenses (NCOs) in the first quarter, the analyst anticipates more favorable future credit quality metrics in comparison to the NCOs of 38 basis points reported. Additionally, the company is recognized for its proactive management of excess capital.
Piper Sandler has revised its earnings per share (EPS) estimates for 1st Source for the years 2024 and 2025 to $4.80 and $4.65, respectively. This adjustment represents a 6% increase for 2024 and a 7% increase for 2025. The new price target is based on a 13.0 times multiple of the firm's 2025 estimated earnings per share, which is a slight decrease from peer multiples but still commands a premium compared to the peer average of 10.0 times.
The firm's decision to raise the price target is based on 1st Source's consistent performance and the expectation that it will continue to deliver strong financial results. The Overweight rating suggests that Piper Sandler believes the stock has a higher potential to outperform the average return of the stocks the firm covers.
InvestingPro Insights
With Piper Sandler's positive adjustment to 1st Source Corporation's (NASDAQ:SRCE) price target, additional context can be gleaned from InvestingPro data and tips that highlight the financial health and market performance of the company. The market cap of 1st Source stands at a solid $1.21B USD, and it showcases a P/E ratio of 9.92, which is slightly below the adjusted P/E ratio for the last twelve months as of Q1 2024, indicating reasonable valuation compared to earnings. Furthermore, the company has demonstrated a commitment to shareholder returns, with a dividend yield of 2.76% and a notable dividend growth of 6.25% in the last twelve months as of Q1 2024.
InvestingPro Tips underscore the company's track record and future potential, with analysts revising their earnings upwards for the upcoming period, a testament to the company's expected profitability. It's worth noting that 1st Source has raised its dividend for 31 consecutive years, highlighting its reliability as an income-generating investment. For investors seeking more insights, there are additional InvestingPro Tips available that could further inform investment decisions. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable insights.
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