On Friday, Truist Securities adjusted its outlook on Trustmark (NASDAQ: NASDAQ:TRMK), increasing the price target to $36 from $35 while sustaining a Hold rating on the stock. The adjustment follows Trustmark's third-quarter earnings surpassing expectations, leading to an upward revision of the Core EPS estimates for the years 2024 and 2025.
The new estimates for Core EPS are now set at $2.91 for 2024 and $3.01 for 2025, up from the previous figures of $2.85 and $2.98, respectively. The revision is mainly due to an anticipated rise in net interest income (NII), although this is expected to be partially offset by a reduction in fees and an increase in expenses.
Truist Securities anticipates that the NII will experience a slight decline through the first quarter of 2025 as the net interest margin (NIM) faces pressure during a cycle of Federal Reserve easing. Despite mixed credit quality in the recent quarter, the firm expects that net charge-offs (NCOs) will stay within manageable levels.
The valuation of Trustmark shares is deemed close to fair at 11.5 times the projected 2025 EPS. The raised price target of $36 is based on a multiple of 12.0 times the estimated 2025 earnings per share (EPS). The Hold rating indicates that while the stock's current valuation is recognized, Truist Securities advises maintaining the stock without suggesting a strong buy or sell action.
In other recent news, Trustmark Corporation reported a significant increase in income, with a net income of $51.3 million and diluted earnings per share of $0.84, marking a 26.7% rise from the same period last year. The company's net interest income also saw a 9.5% growth, reaching $158 million.
However, there was a slight decline in loans held for investment and a decrease in deposits, primarily due to strategic reductions in public and brokered deposits.
In terms of company developments, Trustmark Corporation has appointed Lea B. Turnipseed as its new independent director. Turnipseed, with extensive leadership experience at Entergy Corporation (NYSE:ETR), will take up her new role effective January 1, 2025. She will also serve on the Board of Directors of Trustmark National Bank.
As part of its strategic planning, Trustmark Corporation is actively pursuing merger and acquisition opportunities, particularly in Houston and Birmingham. These recent developments underline the company's strategic focus in a challenging economic environment.
InvestingPro Insights
Recent InvestingPro data and tips provide additional context to Truist Securities' analysis of Trustmark (NASDAQ: TRMK). The company's P/E ratio stands at 60.56, which aligns with the InvestingPro Tip indicating that TRMK is "Trading at a high earnings multiple." This high multiple suggests that investors have high expectations for future growth, despite Truist's Hold rating.
Interestingly, TRMK's PEG ratio of 0.54 for the last twelve months as of Q3 2024 indicates that the stock might be undervalued relative to its earnings growth potential. This is further supported by an InvestingPro Tip stating that TRMK is "Trading at a low P/E ratio relative to near-term earnings growth," which could explain Truist's decision to raise the price target.
The company's dividend yield of 2.67% and the InvestingPro Tip highlighting that TRMK "Has maintained dividend payments for 52 consecutive years" underscore its appeal to income-focused investors. This consistent dividend history may provide some stability to the stock's valuation, even as Truist anticipates potential pressure on net interest margins.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Trustmark's financial health and market position.
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