DA Davidson has adjusted its price target for U.S. Bancorp (NYSE: USB), increasing it to $54.00 from the previous $49.00, while keeping a Neutral rating on the stock.
The revision follows U.S. Bancorp's third-quarter performance, which exhibited positive operating leverage, excluding a $119 million securities loss. The bank is anticipated to achieve over 1% operating leverage in the fourth quarter of 2024 and to see further expansion in 2025.
U.S. Bancorp's third-quarter results were marked by robust growth in net interest income (NII), driven by significant net interest margin (NIM) expansion. This growth came as a response to the recent 50 basis point rate cut. Despite this positive development, the bank's fee income showed signs of weakness. For the fourth quarter, the NII is expected to remain relatively stable compared to the previous quarter.
Management at U.S. Bancorp has expressed a clear stance against mergers and acquisitions, citing the current unfavorable regulatory environment and a strategic emphasis on organic growth. This decision aligns with the bank's focus on leveraging its existing operations to drive growth.
In other recent news, U.S. Bancorp has seen a series of positive developments. The company reported robust earnings per share (EPS) of $1.03 in both Q3 and Q4 of 2023, with total net revenue reaching $6.9 billion in Q3 2024. Following these results, several financial firms adjusted their price targets for U.S. Bancorp. Oppenheimer increased its price target to $59, Baird to $54, RBC Capital Markets to $53, and Stephens to $52, while JP Morgan maintained a neutral stance with a consistent price target of $48.
These adjustments come after U.S. Bancorp demonstrated a turnaround in net interest income (NII) and operating leverage, following a period of decline. The company has also clarified its strategy, focusing on organic growth, enhancing client relationships, and improving interconnectivity, rather than pursuing large bank mergers and acquisitions.
U.S. Bancorp plans to initiate modest share buybacks in the near future. Its annual investment of $2.5 billion in technology, including AI initiatives, and successful partnerships with State Farm and Edward Jones, are expected to support future growth.
InvestingPro Insights
U.S. Bancorp's recent performance and DA Davidson's optimistic outlook are further supported by real-time data and insights from InvestingPro. The bank's market capitalization stands at $77.62 billion, reflecting its significant presence in the financial sector. With a P/E ratio of 15.65, U.S. Bancorp is trading at a reasonable valuation relative to its earnings, which aligns with DA Davidson's price target rationale.
InvestingPro Tips highlight U.S. Bancorp's strong dividend history, noting that the bank "has raised its dividend for 13 consecutive years" and "has maintained dividend payments for 54 consecutive years." This consistent dividend growth underscores the bank's financial stability and commitment to shareholder returns, which is particularly relevant given the article's focus on the bank's performance and future outlook.
Additionally, U.S. Bancorp has seen a "significant return over the last week," with InvestingPro data showing a 9.5% price total return in the past week and an impressive 47.69% return over the past year. This recent stock performance supports DA Davidson's decision to raise the price target and maintains a positive sentiment around the stock.
For investors seeking a deeper understanding of U.S. Bancorp's potential, InvestingPro offers 11 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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