On Friday, Piper Sandler adjusted its outlook for Simmons First National (NASDAQ:SFNC), raising the bank's price target to $20.00 from the previous $18.00, while keeping an Underweight rating on the stock. The firm's analyst cited a higher than expected net interest margin (NIM) in the last quarter and a decrease in nonperforming loans as key factors for the revision.
The update follows a performance review where Simmons First National exhibited a 3 basis points increase in NIM compared to the previous quarter. Additionally, the bank saw a reduction in its run-off portfolio, leading to a fall in nonperforming loans.
These improvements prompted Piper Sandler to revise its earnings estimates for 2024 and 2025 to $1.32 and $1.56 per share, up from $1.30 and $1.52, respectively.
The analyst highlighted positive developments in certificate of deposit (CD) re-pricing trends. April marked the first month in which CD renewals came in at lower rates than those of maturing CDs. This trend is anticipated to potentially provide an upside to the net interest margin and the firm's earnings estimates, particularly with the third quarter of 2024 renewals.
Simmons First National's management strategy was acknowledged for its long-term, patient approach, which is believed to preserve shareholder value. However, this strategy is also seen as a reason for a slower path to higher profitability.
Piper Sandler's stance reflects a cautious outlook, suggesting that while there may be positive developments, they could signify a gradual transition rather than an immediate impact on the bank's balance sheet.
InvestingPro Insights
Piper Sandler's recent upgrade of Simmons First National (NASDAQ:SFNC) aligns with some of the positive sentiments reflected in the latest InvestingPro data and tips. The bank's long-standing commitment to shareholder returns is underscored by its impressive track record of raising its dividend for 51 consecutive years, a testament to its financial stability and prudent management strategy.
InvestingPro Tips suggest that analysts are optimistic about the bank's prospects, with three analysts revising their earnings upwards for the upcoming period, which may indicate a stronger performance than the market has currently priced in. Additionally, Simmons First National has been trading near its 52-week high, reflecting robust investor confidence and a strong return over the last three months.
The InvestingPro Data reveals a market capitalization of $2.74 billion and a trailing twelve months adjusted P/E ratio as of Q2 2024 standing at 17.1. These figures, along with a dividend yield of 3.85%, showcase the bank's appeal to income-focused investors. Moreover, the recent price total return metrics indicate a significant uptick, with a one-month price total return of 29.51% as of the date provided, highlighting the stock's recent bullish momentum.
Investors interested in further insights can find additional InvestingPro Tips that may guide their investment decisions. For those looking to delve deeper into Simmons First National's financials and forecasts, using the coupon code PRONEWS24 can secure up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
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