On Thursday, Piper Sandler adjusted its financial outlook for UMB Financial (NASDAQ: NASDAQ:UMBF), increasing the price target to $120 from the previous $102, while maintaining an Overweight rating on the stock.
The firm's analyst highlighted UMB Financial's solid performance in the second quarter and anticipates further outperformance in the second half of 2024, driven by potential net interest margin (NIM) improvements and superior operating leverage.
The analyst remains optimistic about UMB Financial's credit quality, expecting it to continue being a non-issue. Looking forward to 2025, the analyst believes that the ongoing acquisition of Heartland Financial USA, Inc. (NASDAQ:HTLF), which is progressing as planned, will act as an additional catalyst for UMB Financial.
The acquisition is expected to stabilize the NIM, thanks to HTLF's high-quality, low-cost deposit base, and a conservative cost savings target of 27.5% is likely to contribute to consistently above-average profitability for UMB Financial.
The positive outlook is further supported by anticipated ongoing operating leverage across UMB Financial's less capital-intensive fee businesses, which is likely to contribute to future price-to-earnings (P/E) expansion.
Piper Sandler has raised its operating earnings per share (EPS) estimates for UMB Financial for 2024 and 2025 to $8.72 and $9.20 respectively, marking a 6% increase for 2024 and a 3% increase for 2025. These revised estimates are based on improved expectations for net interest income (NII) and operating expenses.
The new price target of $120 represents an $18 increase and is based on a 13.0 times multiple of the firm's 2025 estimated EPS. This multiple is an increase of 1.5 times, aligned with higher peer multiples and consistent with UMB Financial's historical premium of 2-3 times over its peers, which typically have a multiple of 10.4 times.
In other recent news, UMB Financial Corporation has reported a strong second quarter in 2024, with GAAP earnings of $101.3 million, or $2.07 per share.
The company saw an increase in net interest income and sustained growth in loans and deposits. The anticipated acquisition of Heartland Financial is expected to boost UMB Financial's growth strategy. The firm's credit quality remains strong, indicated by low net charge-offs and non-performing loans.
Piper Sandler recently adjusted its financial outlook for UMB Financial, raising the price target to $120 and maintaining an Overweight rating. The firm expects UMB Financial to continue outperforming due to potential net interest margin improvements and superior operating leverage.
InvestingPro Insights
As UMB Financial (NASDAQ: UMBF) garners an optimistic outlook from analysts at Piper Sandler, real-time data from InvestingPro corroborates the positive sentiment. With a market capitalization of $4.97 billion and a trailing twelve-month revenue growth of 6.06%, UMB Financial demonstrates a strong financial position. The company's P/E ratio stands at 13.24, reflecting investors' confidence in its earnings potential.
InvestingPro Tips highlight that UMB Financial has not only raised its dividend for an impressive 31 consecutive years but also maintains a healthy dividend yield of 1.53%. Furthermore, the company's stock is trading near its 52-week high, showcasing robust investor interest and a strong return over the last three months of 28.45%. Analysts predict the company will remain profitable this year, a sentiment echoed by its performance over the last twelve months.
For investors looking for more detailed analysis and additional InvestingPro Tips, there are 11 more tips available at https://www.investing.com/pro/UMBF. These insights could provide valuable context for UMB Financial's future performance, especially considering the upcoming acquisition of Heartland Financial USA, Inc., which is expected to further bolster UMB Financial's market position.
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