On Thursday, Stephens, a financial services firm, raised the price target for Washington Federal (NASDAQ:WAFD) to $36.00 from the previous $32.00, while maintaining an Equal Weight rating on the stock.
The adjustment follows the release of Washington Federal's second-quarter results, which showcased operational earnings per share (EPS) of $0.76, surpassing the analyst's expectation of $0.51. The company's pre-provision net revenue (PPNR) also exceeded forecasts, reporting $85.6 million, an 18% beat.
The bank's net interest margin (NIM) reached its lowest point during the quarter, but is expected to improve following a $2.8 billion multifamily loan sale that took place later in the quarter.
This sale has provided Washington Federal with significant flexibility to reduce its borrowing position, some of which was already actioned late in the quarter, and to fund future loan growth. The growth is anticipated to pick up in the second half of 2024 and into 2025, mainly driven by commercial real estate (CRE) lending.
Washington Federal has experienced modest deposit attrition following the Loan Balance Challenge (LBC), a move described as intentional by the company as it seeks to restructure its deposit base.
Nonetheless, non-interest bearing (NIB) growth was robust at 5% on a linked quarter annualized (LQA) basis, and there is potential for further acceleration as the bank continues to expand its commercial banking operations in California.
In light of the recent quarterly performance, Stephens has revised its operating EPS forecast for fiscal year 2025 to $3.00, up from the previous $2.89. The new price target of $36.00 is based on 12 times the firm's 2025 EPS forecast. Washington Federal's stock rating remains at Equal Weight, indicating that the analysts believe the company's stock is expected to perform in line with the sector or the overall market.
In other recent news, WaFd Inc. has been making strategic moves that have caught the attention of investors and analysts alike. The company made headlines with its decision to sell $3.2 billion of LBC loans at 91.96%, a move that aligns closely with the carrying value of the held-for-sale book. This transaction is expected to add approximately 80 basis points to WaFd's Common Equity Tier 1 (CET1) ratio, thereby enhancing the company's balance sheet flexibility.
Additionally, the company's board has approved a significant increase in its share repurchase authorization by an additional 10 million shares. This brings the total to 11.8 million shares or about 14.5% of shares outstanding. Piper Sandler, an analyst firm, has revised its earnings per share (EPS) estimates for WaFd for the years 2024 and 2025 in light of these developments.
WaFd has also declared a regular cash dividend of 26 cents per share, marking the company's 165th consecutive quarterly dividend. Amid these developments, analysts from firms such as Keefe, Bruyette & Woods, Inc. and Piper Sandler have provided varied ratings and price targets for the company, reflecting the potential impact of these strategic decisions on WaFd's future.
InvestingPro Insights
Following the positive outlook from Stephens, current metrics from InvestingPro reveal additional strengths and considerations for Washington Federal (NASDAQ:WAFD). Notably, the company has demonstrated a commitment to shareholder returns, having raised its dividend for 5 consecutive years and maintained payments for an impressive 42 years. This consistency is reflected in a solid dividend yield of 3.06% as of the last twelve months leading up to Q3 2023. Additionally, recent performance metrics are encouraging, with significant returns over the last week (12.1%), month (28.22%), and three months (26.9%), suggesting robust short-term investor confidence.
InvestingPro Tips indicate that while analysts have revised their earnings upwards for the upcoming period, there is caution to be exercised as the stock is currently in overbought territory according to the Relative Strength Index (RSI). Furthermore, the company is trading near its 52-week high, with its price at 97.93% of this peak, which may influence investor strategies in the short term.
For investors seeking a deeper analysis, additional InvestingPro Tips for Washington Federal are available, offering insights that could further inform investment decisions. Interested readers can explore these by visiting InvestingPro's dedicated page for Washington Federal and can benefit from a special offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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