On Friday, Truist Securities revised its price target for United Community Banks (NYSE:UCB), dropping it to $30.00 from the previous $32.00, while maintaining a Hold rating on the stock. The adjustment follows the third-quarter results of the company, which prompted the firm to modify its Core EPS estimates for 2024 and 2025.
The new Core EPS projections are now set at $2.21 for 2024 and $2.19 for 2025, a slight decrease and increase respectively from the earlier estimates of $2.25 and $2.17. This change is based on a combination of factors, including higher Net Interest Income (NII) and reduced expenses, which are somewhat balanced by lower fee revenues.
Truist anticipates that NII will hit its lowest point in the first quarter of 2025, after which it is expected to rise due to the effects of fixed-rate repricing and decreased deposit costs, which are seen to outweigh the impact of floating rate assets. The firm also commented on credit quality, noting a mixed picture but expressing optimism over the continuous decline in nonperforming loans at Nativas, which fell to 1.34% of average loans from 1.42% in the previous quarter.
The valuation of United Community Banks stock was described as close to fair at 12.8 times the firm's estimated 2025 EPS. However, given a softer loan growth outlook, there appears to be limited upside to the estimates. The new price target of $30 is based on 13.7 times the estimated 2025 earnings per share.
In other recent news, United Community Banks has been the subject of various financial analyses and significant developments. The bank reported stable operating earnings per share at $0.52 for the first quarter of 2024, along with a modest 1.2% loan growth and a slight improvement in net interest margin. In a significant move, United Community Banks announced plans to transfer its stock listing from NASDAQ to the New York Stock Exchange (NYSE), a development aimed at enhancing visibility among investors and stakeholders.
Financial services firm Piper Sandler revised its outlook on United Community Banks, reducing the price target to $28.00 from the previous $29.00, while maintaining a Neutral rating. The firm's analyst cited adjustments to the earnings estimates for the upcoming years as the main reason for the change. The revised earnings estimates are now set at $2.20 for 2024, $2.25 for 2025, and an initiated estimate of $2.46 for 2026.
Meanwhile, DA Davidson maintained a Buy rating on United Community Banks, raising its price target to $35.00. This positive outlook is based on the bank's strong liquidity position and potential for accelerated loan growth by 2025. The firm's analysis suggests that United Community Banks is well-equipped to navigate the upcoming years with a strategic edge in its market.
Among other recent developments, United Community Banks received recognition for its customer satisfaction, trustworthiness, and workplace environment, securing J.D. Power's award for best customer satisfaction among consumer banks in the Southeast region. The bank's assets totaled $27.1 billion as of June 30, 2024. Federal Reserve Governor Lisa Cook affirmed the robust financial health of U.S. sectors, including banks, in a recent address.
InvestingPro Insights
Recent data from InvestingPro offers additional context to Truist Securities' analysis of United Community Banks (NYSE:UCB). The company's market capitalization stands at $3.37 billion, with a P/E ratio of 18.4, slightly higher than the adjusted P/E ratio of 17.49 for the last twelve months. This valuation aligns with Truist's assessment of the stock being close to fair value.
InvestingPro Tips highlight UCB's consistent dividend history, having raised its dividend for 10 consecutive years and maintained payments for 11 years. This track record, coupled with a current dividend yield of 3.4%, may appeal to income-focused investors despite the recent price target reduction.
While Truist projects improved NII and reduced expenses, it's worth noting that UCB's revenue growth has been negative, with a -3.99% decline over the last twelve months. However, the company maintains a strong operating income margin of 35.92%, which could support the firm's optimistic outlook on future performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips that could provide deeper insights into UCB's financial health and future prospects.
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