On Wednesday, Truist Securities updated its outlook on shares of Cadence BanCorp (NYSE: CADE), raising the price target to $38 from the previous $31 while maintaining a Buy rating on the stock. This adjustment follows Cadence BanCorp's second-quarter earnings and pre-provision net revenue (PPNR) results, which surpassed expectations.
The firm's revised price target is influenced by a combination of factors, including an increase in fee income and net interest income (NII) for the year 2024. Moreover, deposit cost pressures are showing signs of easing, and the bank's management now anticipates the net interest-bearing (NIB) mix to reach approximately 21% by the end of the year, a slight increase from the earlier forecast of 20%.
Cadence BanCorp's loan growth appears to be on a consistent trajectory, and Truist Securities projects a net interest margin (NIM) expansion continuing into 2025. This expansion is expected to be driven by a rise in loan yields, which will benefit from both growth and repricing, as well as a slowdown in the rise of deposit costs.
Encouraging credit quality trends were also noted, with non-performing assets (NPAs) showing a 10% quarter-over-quarter decrease and classified loans dropping by 3%. The firm believes that Cadence BanCorp's stock remains appealing, trading at 12.2 times the firm's estimated earnings per share (EPS) for 2025. This perspective takes into account the bank's projected adjusted PPNR growth of 6% in both 2024 and 2025, as well as its robust capital and reserves.
In conclusion, the new price target of $38 reflects a valuation of 13.7 times the estimated EPS for 2025, up from the previous valuation of $31.
In other recent news, Cadence Bank announced robust Q2 2024 results, reporting a GAAP net income of $135.1 million and adjusted net income from continuing operations of $127.9 million. The bank displayed a notable loan growth of $430 million, despite a slight decrease in total deposits. Operational efficiencies were also highlighted, with adjusted expenses reducing by over $12 million.
In terms of shareholder value, Cadence Bank has strategically repurchased 256,000 shares of stock and managed $139 million in subordinated debt. The bank's net interest margin improved to 3.27%, maintaining a stable credit quality.
These recent developments suggest a strong financial performance by Cadence Bank. While total deposits saw a decline, loan growth, primarily in residential and commercial sectors, and improved operational efficiency were bullish highlights. Future acquisitions aligning with the bank's culture and footprint are also on the cards.
InvestingPro Insights
Following Truist Securities' updated outlook on Cadence BanCorp (NYSE: CADE), InvestingPro data shows a market capitalization of $6.13 billion and a high P/E ratio of 86.57, indicating a premium valuation in the market.
Despite a challenging revenue environment with a decline of nearly 25% over the last twelve months as of Q2 2024, Cadence BanCorp has managed to maintain a solid dividend yield of 2.98%, with a history of raising its dividend for 11 consecutive years, showcasing its commitment to shareholder returns.
InvestingPro Tips highlight that Cadence BanCorp's stock has experienced strong returns, including a 50.55% one-year price total return, and it is trading near its 52-week high, at 98.39% of this peak. Analysts predict the company will be profitable this year, which aligns with the positive outlook from Truist Securities.
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