On Monday, Piper Sandler adjusted its outlook on WaFd, Inc. (NASDAQ: WAFD), reducing the stock's price target to $35 from the previous $36, while maintaining a Neutral rating. The adjustment reflects a revised earnings per share (EPS) estimate for the fiscal year 2025 and the introduction of an estimate for fiscal 2026.
The firm's analyst cited a range of factors for the lowered forecast, including expectations of a smaller balance sheet, reduced fee income, increased non-interest expense (NIE), and a significant reduction in share buybacks. These elements were only partially offset by a decrease in loan loss provisions (LLPs).
The new price target is based on a 12.5 times multiple applied to the revised fiscal 2025 EPS estimate, which has been decreased to $2.84 from the earlier projection of $3.10. This multiple has been raised from the prior 11.5 times due to higher market multiples.
Furthermore, the analyst has established a fiscal 2026 EPS estimate of $3.20. The price target reduction to $35 represents a $1 decrease and incorporates a discount relative to peers, who are valued at an average multiple of 13.5 times. The discount is attributed to WaFd's balance sheet, which is considered more thrift-like following its merger with LBC.
In other recent news, WaFd Inc. has announced the release of its earnings results for the quarter and fiscal year ended September 30, 2024. The bank has also declared a cash dividend of $12.1875 per share on its 4.875% Fixed Rate Series A Non-Cumulative Perpetual Preferred Stock, and a regular quarterly cash dividend of 26 cents per share. This marks the financial institution's 166th consecutive quarterly cash dividend.
Furthermore, WaFd Inc. sold $3.2 billion of Loan Balance Challenge (LBC) loans, a strategic decision expected to enhance the company's balance sheet flexibility. In terms of analyst perspectives, DA Davidson increased WaFd's price target to $39 while maintaining a Buy rating. Stephens, another financial services firm, raised the price target for WaFd to $36.00, maintaining an Equal Weight rating on the stock.
WaFd's second-quarter results surpassed analysts' expectations, with operational earnings per share (EPS) of $0.76, beating the predicted $0.51. The company's pre-provision net revenue (PPNR) also exceeded forecasts, reporting at $85.6 million, an 18% beat. These are recent developments for WaFd Inc.
InvestingPro Insights
Recent data from InvestingPro provides additional context to Piper Sandler's analysis of WaFd, Inc. (NASDAQ: WAFD). The company's P/E ratio stands at 14.48, which is lower than the 12.5 times multiple used by Piper Sandler for their price target calculation. This suggests that the stock might be undervalued compared to the analyst's expectations.
InvestingPro Tips highlight that WAFD has maintained dividend payments for 42 consecutive years and has raised its dividend for 5 consecutive years. This consistent dividend history could be attractive to income-focused investors, especially considering the current dividend yield of 2.88%. The company's commitment to shareholder returns is further emphasized by its high shareholder yield, as noted in another InvestingPro Tip.
While Piper Sandler has reduced its price target, it is worth noting that WAFD is trading near its 52-week high, with a strong price performance over the last year. The stock has seen a 52.98% total return over the past year, and a 31.8% return in the last six months, indicating significant momentum.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for WAFD, providing a deeper understanding of the company's financial health and market position.
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