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On Monday, Citi analyst Keith Horowitz upgraded shares of KeyCorp (NYSE: NYSE:KEY) from Neutral to Buy, setting a price target of $20.00. With a current market capitalization of $17.38 billion and trading at 1.11 times book value, Horowitz highlighted the recent decline in the sector as an opportunity, pointing to KeyCorp’s position as one of the best values based on their implied cost of equity valuation screen. According to InvestingPro data, the stock appears fairly valued at current levels.
KeyCorp, according to Horowitz, stands out as a potential safe haven in the face of growing credit concerns and a potentially weakening macroeconomic environment. The company’s limited exposure to consumer and commercial real estate lending, along with a robust proforma Common Equity Tier 1 (CET1) ratio of 9.8%, underpins this view. The bank currently offers an attractive 5.21% dividend yield and has maintained dividend payments for 54 consecutive years.
Horowitz anticipates that KeyCorp’s earnings per share (EPS) could reach approximately $2 by 2027, a significant rise from the current 2025 estimate of $1.55 EPS. This projection suggests that the stock is trading at a compelling eight times normalized earnings.
The analyst also noted that KeyCorp’s management has expressed intentions to seek board approval for reinstating a stock buyback program, which could provide additional support for the share price. The upgrade to a Buy rating reflects the combination of KeyCorp’s attractive valuation and its solid fundamentals.
In other recent news, KeyCorp reported its fourth-quarter 2024 earnings, exceeding analyst expectations with an adjusted earnings per share (EPS) of $0.38, surpassing the forecasted $0.33. Despite the earnings beat, the company faced a significant revenue shortfall, recording $865 million compared to the anticipated $1.74 billion. This discrepancy in revenue has raised investor concerns, leading to a stock decline. KeyCorp also achieved record annual adjusted EBITDA of $1.3 billion and net earnings of $487 million for the full year. The company has raised its dividend by 4%, signaling confidence in its financial health. Analyst reactions to these developments were mixed, with concerns primarily centered around the revenue miss. Additionally, KeyCorp outlined its capital expenditure plans for 2025, targeting growth expenditures of $300-$330 million and maintenance expenditures of $70-$90 million. The company also discussed potential partnerships to enhance market access, addressing questions about its strategies to overcome revenue generation challenges.
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