On Thursday, Piper Sandler adjusted its outlook on Pathward Financial (NASDAQ:CASH), raising the price target for the company's stock to $75 from the previous $68 while retaining an Overweight rating. The financial institution reported second-quarter earnings per share (EPS) of $1.66, surpassing consensus estimates and exceeding the firm's own projections by 7% and 12%, respectively.
Pathward Financial's quarterly results included a one-time gain from Visa (NYSE:V) shares and some non-recurring expenses, including an impairment charge, which were considered to effectively neutralize each other. Consequently, the core earnings were aligned with the reported figures. Notably, the earnings beat was attributed to a $0.05 surplus in net interest income (NII) and a $0.13 boost from a lower tax rate.
Management at Pathward Financial also provided preliminary earnings expectations for 2025, forecasting $7.00 to $7.50 per share. This guidance midpoint suggests a 7% increase over the current consensus and a 12% year-over-year earnings growth. While this news is likely to be well-received by investors, the company's recent share price appreciation may temper expectations for another significant increase post-earnings announcement.
The financial analyst firm indicated that the increase in earnings was somewhat unexpected, as it was more driven by net interest income rather than fees. Looking ahead, despite the recent run-up in the stock's price, the analyst firm believes Pathward Financial remains an attractive investment over the next 12 months and thus reaffirmed its Overweight rating on the shares.
In other recent news, Pathward Financial reported impressive Q3 results for fiscal year 2024, posting a net income of $41.8 million and earnings per diluted share at $1.66. The company experienced a 14% year-over-year increase in net interest income, demonstrating an improvement in both net interest margin and adjusted net interest margin.
As part of recent developments, Pathward Financial is planning to introduce an earnings per diluted share guidance for fiscal year 2025, estimated to range from $7 to $7.50.
Furthermore, the company is focused on balance sheet management and expanding its product offerings, to optimize assets. For fiscal year 2025, Pathward Financial anticipates a loan growth of 10% to 15% in the first half of the year. Additionally, the company is eyeing capital optimization and share buybacks with a projected payout ratio for 2025 set at 60% to 70%.
Despite an increase in non-performing loans primarily in consumer finance, Pathward Financial remains committed to organic growth and building capital for future needs. The company has also implemented packaged AI solutions to improve efficiency in the commercial finance group and sees potential for AI in generating adverse action reports and other areas.
InvestingPro Insights
Recent analysis from InvestingPro has highlighted several key metrics for Pathward Financial that could be of interest to investors following Piper Sandler's outlook update. With a market capitalization of $1.64 billion and a trailing P/E ratio of 9.76, Pathward Financial appears to offer value relative to near-term earnings growth, as indicated by its low PEG ratio of 0.2. Additionally, the company has shown substantial revenue growth over the last twelve months, with a 17.47% increase, reflecting strong operational performance.
InvestingPro Tips suggest that the management's confidence is reflected through their aggressive share buyback program, and despite analysts revising earnings downwards for the upcoming period, the company has maintained dividend payments for 31 consecutive years. This consistency in dividends may appeal to income-focused investors, especially when considering the stock is trading near its 52-week high and has delivered a strong return over the last three months of 22.43%.
For investors seeking a deeper analysis, InvestingPro offers additional tips on Pathward Financial. By using the coupon code PRONEWS24, investors can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, gaining access to comprehensive insights that could further inform their investment decisions. There are 11 more InvestingPro Tips available for Pathward Financial, which can be explored for a more nuanced understanding of the company's financial health and market position.
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