On Thursday, Piper Sandler adjusted its outlook on Pathward Financial (NASDAQ: CASH) shares, raising the price target to $82.00 from the previous $75.00 while maintaining an Overweight rating on the stock. The adjustment follows Pathward Financial's third-quarter earnings report, which revealed earnings per share (EPS) of $1.35, surpassing both Piper Sandler's estimate of $1.29 and the consensus estimate of $1.26.
The company's third-quarter results contributed to it slightly exceeding its full fiscal year guidance, with a reported GAAP EPS of $6.62 against the forecast range of $6.40-6.60. This performance was primarily attributed to a revenue beat of $0.12, driven by net interest income (NII) and robust asset balances. Pathward Financial also demonstrated exceptional profitability, with a return on assets (ROA) of 2.2% for the quarter.
In addition to outperforming expectations, Pathward Financial has revised its 2025 earnings guidance upward. The firm is also anticipated to update its guidance following the completion of the sale of its insurance premium finance business, which is expected to close on October 31.
The positive earnings report and the subsequent price target increase reflect Pathward Financial's strong financial performance and the potential for continued growth as indicated by the revised earnings guidance and the upcoming sale completion.
In other recent news, Pathward Financial concluded its fiscal year 2024 on a high note, reporting a net income of $168.4 million and an 11% increase in earnings per diluted share to $6.62.
The financial services company also raised its earnings guidance for fiscal year 2025 to $7.10 to $7.60 per diluted share, excluding the impact of the sale of its commercial insurance premium finance business. This sale is expected to enhance Pathward Financial's performance in the upcoming fiscal year.
Moreover, the company rebranded its Banking as a Service business to Partner Solutions and extended key partnerships. Despite a decrease in total deposits and non-interest income, Pathward Financial experienced growth in its consumer lending pipeline and anticipates balance sheet optimization and earnings growth in fiscal year 2025.
Furthermore, the company repurchased over 1.5 million shares during the fiscal year. These are among the recent developments at Pathward Financial, as the company continues to optimize its asset mix and invest in technology to support partner growth.
InvestingPro Insights
Pathward Financial's recent performance aligns with several key metrics and insights from InvestingPro. The company's P/E ratio of 10.92 and PEG ratio of 0.47 for the last twelve months as of Q3 2024 suggest that the stock may be undervalued relative to its earnings growth potential, supporting Piper Sandler's Overweight rating. This is further reinforced by an InvestingPro Tip indicating that Pathward is "Trading at a low P/E ratio relative to near-term earnings growth."
The company's strong financial performance is reflected in its revenue growth of 12.62% over the last twelve months and an impressive operating income margin of 28.96%. These figures align with the earnings beat and profitability mentioned in the article. Additionally, Pathward's return on assets of 2.29% for the last twelve months corroborates the 2.2% ROA highlighted in the quarterly report.
Investors may also be interested to know that Pathward has shown a substantial 70.43% price total return over the past year, and is currently trading at 96.65% of its 52-week high. This performance is consistent with the InvestingPro Tip noting a "High return over the last year" and "Trading near 52-week high."
For those seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Pathward Financial, providing a deeper understanding of the company's financial health and market position.
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