On Tuesday, Piper Sandler updated its outlook on Cathay General Bancorp (NASDAQ:CATY) shares, increasing the price target to $36.00 from $32.00, while maintaining an Overweight rating on the stock.
The revision follows Cathay General's recent financial performance, where the company reported operating earnings per share (EPS) of $0.94, aligning with the consensus and slightly surpassing Piper Sandler's estimate of $0.93.
This earnings result was influenced by various factors, including higher non-interest expense (NIE), which negatively impacted EPS by $0.10. However, this was offset by a favorable tax rate contributing an additional $0.05 to EPS, loan loss provisions (LLP) adding $0.04, and net interest income (NII) improving EPS by $0.01.
Piper Sandler's updated earnings estimates for Cathay General Bancorp for the years 2024 and 2025 are now set at $3.90 and $4.05 respectively. This adjustment is based on the company's guidance, which anticipates share buybacks in the second half of the year.
The new price target reflects a 9.0 times multiple on the projected 2025 earnings per share, an increase from the previous 8.5 times multiple. The firm notes that this valuation is consistent with a discount to the bank's peers.
Despite expecting Cathay General to underperform due to lower pre-provision net revenue (PPNR), Piper Sandler believes that the bank's guidance, which includes the planned share buybacks, should provide support for the stock's performance.
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