Baird has announced an adjustment to the price target for Zions Bancorp (NASDAQ: ZION), increasing it to $55.00 from the previous $52.00.
The firm has decided to maintain a Neutral rating on the stock. The revision follows Zions Bancorp's third-quarter performance, which surpassed both consensus and Baird's own forecasts.
The company's pre-provision net revenue (PPNR) for the third quarter of 2024 exceeded expectations, driven by a noticeable sequential improvement in net interest income (NII) and a decline in core fees and expenses.
Following the earnings release on Monday, Zions Bancorp's stock experienced an uptick in after-hours trading. The better-than-expected NII suggests that the company could see a higher revenue run-rate heading into the fourth quarter of 2024 and the full year of 2025.
The analyst pointed out that Zions Bancorp's credit quality remains robust, with net charge-offs (NCOs) constituting approximately 0.02% of loans. The core trends within the company appear to be strong, and the credit performance has been particularly impressive. Despite these positive indicators, Baird maintains a cautious stance on the stock, citing a balanced risk/reward profile as the reason for not altering their neutral position.
In other recent news, Zions Bancorp has seen a series of developments affecting its financial outlook. The company reported a rise in net earnings for the third quarter of 2024, reaching $204 million, a $14 million increase largely due to higher revenues and reduced expenses. This was accompanied by a modest growth in loans and an improvement in customer deposits, particularly non-interest-bearing deposits.
Financial analysts from Stephens and Citi have adjusted their outlook on Zions Bancorp. Stephens raised its price target for the company to $55, while Citi increased its target to $54, both firms maintaining their neutral ratings. These adjustments reflect the company's recent performance, including a positive trend in net interest income and lower-than-expected operating expenses.
Zions Bancorp is also set to acquire four FirstBank branches in California, pending regulatory approval, a move expected to boost its deposit and loan portfolios.
However, the company has noted an increase in non-performing assets and classified loans, primarily linked to challenges in the multifamily sector.
Despite these issues, the company's credit quality remains strong, with analysts predicting stable to slightly increasing loan growth and a 1.4% increase in net interest income in Q3 2025.
InvestingPro Insights
Zions Bancorp's recent performance and Baird's positive price target adjustment are further supported by several key metrics from InvestingPro. The company's P/E ratio of 12.01 suggests that it may be undervalued compared to its peers in the banking sector. This aligns with the InvestingPro Fair Value of $61.45, which is higher than both the current stock price and Baird's new price target of $55.
InvestingPro Tips highlight Zions Bancorp's strong dividend history, having maintained dividend payments for 54 consecutive years and raised them for 11 consecutive years. This demonstrates the company's financial stability and commitment to shareholder returns, which is particularly noteworthy given the recent challenges in the banking sector.
The company's profitability is also emphasized, with InvestingPro data showing an operating income margin of 34.72% for the last twelve months as of Q2 2024. This robust profitability supports Baird's observation of strong core trends within the company.
For investors seeking more comprehensive analysis, InvestingPro offers 7 additional tips for Zions Bancorp, providing a deeper understanding of the company's financial position and future prospects.
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