On Tuesday, Northwest Bancshares, Inc. (NASDAQ:NWBI) had its stock price target lowered to $12 from $13 by Keefe, Bruyette & Woods, while the firm maintained a Market Perform rating on the stock. The adjustment follows the company's first-quarter results, which were reported to be largely in line with expectations, featuring modest loan growth and net interest margin (NIM) compression.
The bank's efforts to improve yields through the redeployment of a portion of its securities portfolio were acknowledged, although it was noted that this strategy is unlikely to fully counterbalance the anticipated funding pressures in the second quarter. Consequently, the firm's estimates for Northwest Bancshares have been modestly lowered.
Credit trends for Northwest Bancshares remained stable in the first quarter. A larger commercial real estate (CRE) loan to a long-term healthcare facility, which had previously moved into non-performing loans (NPLs) last quarter, is reportedly showing positive trends. Despite the slight reduction in the price target, the Market Perform rating is reaffirmed, reflecting a neutral outlook on the stock's potential performance.
The analyst's commentary highlighted the bank's utilization of its excess capital to attempt to mitigate some of the challenges it faces. However, the anticipated funding pressures in the upcoming quarter were significant enough to prompt a revision of the price target. The stable credit trends, coupled with the positive movement of the CRE loan, were also factors considered in maintaining the current stock rating.
InvestingPro Insights
Northwest Bancshares, Inc. (NASDAQ:NWBI) has been the subject of recent analysis following its first-quarter results, and the insights from InvestingPro could provide investors with additional context.
According to real-time data, NWBI has a market capitalization of $1.41 billion and is trading at a P/E ratio of 10.88, which adjusts to 10.5 for the last twelve months as of Q1 2024. Despite a slight revenue decline of 1.12% over the last twelve months, the company boasts a robust operating income margin of 36.99%.
Notably, NWBI pays a significant dividend to shareholders, with a current yield of 7.23%, and has maintained dividend payments for an impressive 30 consecutive years. This consistency is a testament to the company's stability and commitment to returning value to its investors. Moreover, two analysts have revised their earnings upwards for the upcoming period, signaling potential confidence in the company's financial outlook.
Still, investors should be aware that NWBI is trading at a high P/E ratio relative to near-term earnings growth, which could suggest that the stock is priced optimistically given the expected rate of earnings expansion.
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