Citi maintains Buy on U.S. Bancorp stock with $65 target

On Wednesday, Citi analysts, led by Keith Horowitz, reaffirmed their Buy rating on U.S. Bancorp (NYSE:USB) with a steady price target of $65.00. The $65.87 billion market cap bank, which boasts a 55-year streak of consistent dividend payments and a current yield of 4.73%, continues to attract analyst attention. According to InvestingPro data, the stock currently trades at an attractive P/E ratio of 11.18x. The endorsement comes as U.S. Bancorp prepares to disclose its first-quarter earnings, reflecting on the company’s consistent financial outlook for 2025, which was recently confirmed by management during an industry conference.

The management team at U.S. Bancorp has projected an operating leverage increase of over 200 basis points, supported by an anticipated 3-5% rise in total revenue from its current $25.1 billion base. Citi analysts predict approximately 3.5% revenue growth, with net interest income (NII) growing by about 3% and fee revenue increasing by roughly 4%. InvestingPro analysis suggests the company remains financially sound, with analysts forecasting EPS of $4.38 for FY2025. This revenue expansion is expected to almost reach 200 basis points of operating leverage, underpinned by U.S. Bancorp’s established history of stringent expense management in 2024.

Furthermore, U.S. Bancorp’s executives have reiterated their expectations for deposit repricing. The analysts at Citi foresee a deposit beta of approximately 45% in the first quarter, with projections to model in a beta of around 53% by early 2026. This, along with the repricing of fixed-rate assets, is anticipated to facilitate a net interest margin (NIM) enhancement of nearly 10 basis points by the fourth quarter of 2025, reaching 2.81%, and an increase of 16 basis points by the fourth quarter of 2026, to 2.87%.

In terms of capital return, U.S. Bancorp is expected to execute approximately $100 million in stock buybacks during the first quarter, with plans to accelerate these buybacks throughout the year. Citi’s analysis estimates that the total buybacks for the year could amount to around $1.6 billion. Additionally, U.S. Bancorp aims to achieve a 10% pro-forma Common Equity Tier 1 (CET1) ratio by the end of 2026. Based on InvestingPro’s Fair Value analysis, the stock appears slightly undervalued at current levels, with 6 additional exclusive ProTips available for subscribers.

In other recent news, U.S. Bancorp has announced regular dividend payments to its shareholders, including a quarterly dividend of $0.50 per common share, translating to an annual dividend of $2.00 per share. The company also declared dividends on various series of its preferred stock, all payable in mid-April 2025. In executive news, Shailesh M. Kotwal, Vice Chair of Payment Services, will retire in February 2025, and Scott W. Wine will not seek re-election to the Board after the 2025 Annual Meeting. Additionally, Gunjan Kedia is set to succeed Andy Cecere as CEO in April 2023, while Cecere will transition to executive chairman.

In the realm of analyst activity, Piper Sandler has reduced its price target for U.S. Bancorp from $58.00 to $55.00 but maintained an Overweight rating, citing an increase in the estimated earnings per share for 2025. Meanwhile, Oppenheimer raised its price target slightly from $62 to $63, keeping an Outperform rating, despite the bank’s fourth-quarter earnings per share of $1.01 falling short of expectations. The adjusted EPS, accounting for one-time items, was noted to be $1.07. These developments reflect ongoing strategic and financial adjustments at U.S. Bancorp, with analysts expressing varying degrees of confidence in the company’s future performance.

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