On Tuesday, Keefe, Bruyette & Woods adjusted its price target for UMB Financial (NASDAQ:UMBF) shares, increasing it to $93 from $86, while keeping a Market Perform rating on the stock. The firm's decision follows recent developments involving UMB Financial's proposed acquisition of HTLF, which is expected to significantly boost earnings per share (EPS).
The financial institution's deal with HTLF is seen as financially beneficial, with an anticipated 31% increase in EPS, or 15% when excluding rate mark and core deposit intangibles (CDI). This comes as UMB Financial has also seen positive core EPS revisions, buoyed by strong pre-provision net revenue (PPNR) trends.
Keefe, Bruyette & Woods highlighted the attractive valuation multiples for UMB Financial, noting they stand at 8.5 times the firm's estimated earnings for 2025 and 7 times for 2026. These multiples are considered reasonable, especially as UMB Financial is expected to transition from inline returns to above-average performance.
Despite the positive outlook on the financial aspects of the deal and the revisions to core EPS, Keefe, Bruyette & Woods maintains a cautious stance. The firm alluded to historical patterns where stocks involved in deals do not immediately see an upgrade in their market ratings following such announcements.
In summary, while the proposed acquisition of HTLF by UMB Financial is seen as a positive move with substantial EPS accretion and solid PPNR trends supporting a favorable valuation, the market rating remains unchanged at Market Perform due to the typical initial market response to deal-related stocks.
InvestingPro Insights
UMB Financial (NASDAQ:UMBF) has demonstrated a strong track record with its dividend policy, having raised its dividend for 31 consecutive years and maintained payments for 54 years, signaling a commitment to shareholder returns. The company's P/E ratio stands at a competitive 11.04, with an adjusted P/E ratio for the last twelve months as of Q1 2024 at 10.43, suggesting that the stock may be undervalued relative to earnings. Additionally, UMB Financial has experienced a notable price increase of 25.18% over the last six months, reflecting positive investor sentiment.
InvestingPro Tips highlight that UMB Financial is predicted by analysts to be profitable this year and has been profitable over the last twelve months. These factors underscore the company's financial health and may be a contributing factor to Keefe, Bruyette & Woods' positive EPS revision and price target adjustment. For investors looking for more in-depth analysis and additional tips, there are more insights available on InvestingPro, where users can apply the coupon code PRONEWS24 to get an extra 10% off on a yearly or biyearly Pro and Pro+ subscription.
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