On Monday, Piper Sandler adjusted its outlook on TriCo Bancshares shares, the holding company for Tri Counties Bank, by lowering its price target on the company's stock. The new target is set at $50.00, down from the previous $53.00, while the firm maintained its Overweight rating on the shares.
The adjustment comes as Piper Sandler revises its earnings per share (EPS) estimates for TriCo Bancshares for the years 2024 and 2025 to $3.40 and $3.35, respectively, a change from the earlier projections of $3.36 and $3.51. The revision is primarily attributed to an anticipated decrease in net interest income (NII).
In addition to updating the near-term EPS forecasts, Piper Sandler has introduced an EPS estimate for the year 2026, projecting it to reach $3.70. The firm's decision to set the price target to $50 reflects a valuation at 15.0 times the estimated 2025 earnings per share. This valuation maintains a premium relative to the average of TriCo's peers, which stands at 12.4 times EPS.
The rationale behind maintaining a premium valuation is tied to TriCo Bancshares' conservative credit practices, above-average reserves, and strong capital position. Furthermore, the bank's core deposit profile is considered favorable, with 32% non-interest bearing deposits and no brokered deposits. These factors are believed to provide TriCo Bancshares with the balance sheet flexibility to outperform over time.
In other recent news, TriCo Bancshares has been in the spotlight following Piper Sandler's decision to raise its price target for the company from $47.00 to $53.00, maintaining an Overweight rating. This adjustment is based on revised earnings forecasts for 2024 and 2025, with the firm now expecting earnings per share (EPS) of $3.36 and $3.51, respectively, an increase from their previous forecast.
The revised price target reflects a valuation at 15.0 times the estimated 2025 earnings per share, up from the prior multiple of 14.5 times.
Piper Sandler's positive outlook for TriCo Bancshares is influenced by several factors including a higher net interest margin, improved non-interest expense, and lower loan loss provisions. TriCo Bancshares' strong performance metrics, including above-average pre-provision net revenue return on assets, higher than average reserves, robust capital levels, and a low-cost core deposit base, also contribute to this positive outlook.
Despite trading at a premium compared to its peers, which are valued at approximately 12.5 times their earnings, this premium is justified by TriCo Bancshares' high-quality financial indicators and its ability to maintain strong performance relative to other banks in the sector. These recent developments highlight the company's potential for continued growth and stability in the coming years.
InvestingPro Insights
Recent data from InvestingPro adds context to Piper Sandler's analysis of TriCo Bancshares (TCBK). The company's market capitalization stands at $1.39 billion, with a price-to-earnings ratio of 13.09, indicating a relatively modest valuation compared to the broader market. This aligns with Piper Sandler's view of TCBK as an Overweight stock, suggesting potential upside.
InvestingPro Tips highlight TCBK's strong dividend history, having raised its dividend for 11 consecutive years and maintained payments for 32 years. This track record underscores the bank's financial stability and commitment to shareholder returns, which complements Piper Sandler's positive outlook on the company's balance sheet strength and core deposit profile.
However, it is worth noting that TCBK's revenue growth has been negative, with a -5.01% decline in the last twelve months as of Q3 2024. This may explain Piper Sandler's downward revision of EPS estimates and price target, reflecting potential challenges in the near term.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights, with 7 more tips available for TCBK on the platform.
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