On Wednesday, Piper Sandler adjusted its price target for Commerce Bancshares (NASDAQ:CBSH) stock, a regional bank holding company, increasing it to $54 from the previous $53 while maintaining a Neutral rating. The firm's decision follows a review of the company's first-quarter results, which exhibited strength across major income statement line items.
Commerce Bancshares reported a robust performance in the first quarter, prompting Piper Sandler to express a more positive outlook on the company's ability to counteract net interest margin (NIM) compression in the event of a policy shift by the Federal Reserve. The bank's long-term investment appeal was highlighted, with particular emphasis on its strong credit profile, diverse revenue streams, and resilient profitability, which may prove advantageous in a potential recessionary climate.
The firm noted that Commerce Bancshares' valuation relative to its peers could be a factor for a more constructive stance in the future. Currently, the bank's shares are trading at 13.9 times and 14.9 times Piper Sandler's estimated earnings for 2024 and 2025, respectively, and at 2.4 times tangible book value (TBV). This compares to peer averages of 11.7 times and 10.3 times estimated earnings and 1.5 times TBV.
Piper Sandler has revised its earnings per share (EPS) estimates for Commerce Bancshares upward to $3.75 for 2024 and $3.50 for 2025, from the previous estimates of $3.36 and $3.10, respectively. This adjustment is based on the stronger-than-anticipated results in the first quarter, which are expected to contribute to improved net interest income (NII), core fee income, and operating expenses.
The new price target of $54 reflects a 15.5 times multiple on the firm's 2025 earnings estimate for Commerce Bancshares, adjusted down by 1.5 times in line with lower multiples observed among peers. This valuation also aligns with the historical long-term premium that Commerce Bancshares' shares have maintained over its competitors.
InvestingPro Insights
Piper Sandler's positive adjustment of Commerce Bancshares' price target is underpinned by the bank's solid first-quarter performance, and this optimism is echoed in some of the metrics and tips from InvestingPro. Notably, Commerce Bancshares has demonstrated a commitment to shareholder returns, having raised its dividend for 10 consecutive years and maintained dividend payments for an impressive 54 consecutive years, according to InvestingPro Tips. This suggests a stable and reliable income stream for investors, which aligns with the resilient profitability highlighted by Piper Sandler.
InvestingPro Data shows that Commerce Bancshares holds a market capitalization of $6.75 billion and trades at a P/E ratio of 14.29, which is in line with Piper Sandler's valuation relative to earnings estimates. Additionally, the company's revenue growth over the last twelve months as of Q4 2023 was 4.85%, indicating a steady increase that could support the firm's upward revision of EPS estimates. The dividend yield as of March 2024 stands at 2.0%, reinforcing the bank's appeal as an income-generating investment.
For readers seeking a deeper dive into Commerce Bancshares' financial health and future prospects, InvestingPro offers additional insights and metrics. There are more InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/CBSH. To enhance your investment research experience, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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