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On Wednesday, BMO Capital Markets adjusted its outlook on Banco Latinoamericano de Comercio Exterior, S.A (NYSE:BLX), reducing the price target from $45.00 to $42.00, yet maintaining an Outperform rating on the stock. Currently trading at $38.67 and near its 52-week high of $39.40, the stock has demonstrated remarkable strength with a 70.28% return over the past year. The adjustment comes in the wake of a challenging period for the company, marked by negative fund flows in the renewables sector.
The analyst at BMO Capital, Ben Pham, highlighted the factors influencing Banco Latinoamericano's share price performance throughout 2024. Despite the presence of highly contracted assets, a self-funded balance sheet strengthened by Canadian Investment Tax Credits (ITCs), and a reliable management team, the stock experienced downward pressure. According to InvestingPro analysis, while the company maintains strong profitability metrics with a P/E ratio of 7.05, it faces challenges with cash flow management. This was attributed to the broader negative sentiment in the renewables sector.
Looking ahead, Pham remains optimistic about the bank's prospects. He anticipates that investor sentiment towards Banco Latinoamericano will begin to improve during 2025. This optimism is based on the bank's growth prospects, with 644 megawatts (MW) of projects currently under construction, which are expected to drive growth through 2027. The company's commitment to shareholder returns is evidenced by its 21-year streak of consecutive dividend payments, currently yielding 5.11%. For a deeper understanding of BLX's growth potential and financial health, InvestingPro subscribers can access 11 additional expert insights and comprehensive analysis.
The revision of the price target to $42.00 is a direct result of the exclusion of 200MW of New York solar projects from BMO's valuation model. These projects are pending results from the New York State Energy Research and Development Authority (NYSERDA) solicitation. Despite this adjustment, Pham believes that the potential total return of approximately 63% is compelling enough to justify the Outperform rating.
BMO's analysis indicates that Banco Latinoamericano's valuation is trading at a discount, approximately 9 times EBITDA, compared to its renewable peers, which range between 9.5 to 14 times EBITDA. With a market capitalization of $1.41 billion and strong momentum scores according to InvestingPro's Financial Health metrics, this discrepancy suggests a potential for valuation expansion as the market sentiment shifts.
In other recent news, Bladex has reported record-breaking results for the third quarter of 2024, with significant growth in its commercial portfolio and deposits, and a substantial increase in net income. The bank's commercial portfolio saw a 5% quarter-on-quarter and 17% year-on-year growth, reaching $9.7 billion. Deposits also achieved a new high of $5.6 billion, marking a 34% annual increase.
Bladex's net income for the quarter rose to a record $53 million, a 16% increase from the previous year. Total (EPA:TTEF) assets climbed to $11.4 billion, driven by a strong loan growth. The bank's funding mix saw improvement, with deposits now accounting for 59% of total funding.
These recent developments also highlight that the bank is transitioning from the optimization to the expansion phase of its strategic plan, with new trade and treasury platforms expected in the second half of 2025. Analyst coverage from Credicorp (NYSE:BAP) and BTG Pactual indicates increased interest in the company. The bank's management team remains committed to maintaining pricing discipline and is optimistic about Bladex's ability to navigate potential market challenges.
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