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On Tuesday, Zions Bancorp (NASDAQ:ZION) shares received a new stock rating from Jefferies, marking the start of the firm’s coverage on the bank. The research firm set a price target of $40 and issued an Underperform rating, below the current consensus target of $54. According to InvestingPro data, the stock is currently trading near its Fair Value, with analyst targets ranging from $47 to $61. The evaluation by Jefferies reflects concerns over Zions Bancorp’s earnings growth and capital levels compared to its competitors.
Jefferies’ analysis points to Zions Bancorp’s earnings growth outlook as a significant factor in the Underperform rating. The firm anticipates a 6% earnings per share (EPS) growth for Zions in the years 2026 and 2027, which stands below the 12% average growth rate estimated for its peers. InvestingPro data shows that 8 analysts have recently revised their earnings estimates downward, though the bank maintains a relatively attractive P/E ratio of 9.47x. This slower growth projection is a central element in Jefferies’ cautious stance on the bank’s stock.
Another aspect influencing the Underperform rating is Zions Bancorp’s capital levels. Jefferies notes that, including the accumulated other comprehensive income (AOCI), Zions has lower capital levels in comparison to its peers. Despite these concerns, the bank has maintained dividend payments for 55 consecutive years and currently offers a 3.5% dividend yield. This measurement is vital for assessing the bank’s financial health and ability to withstand potential economic downturns. For deeper insights into Zions’ financial strength, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
The report also highlights Zions Bancorp’s limited ability to leverage expenses significantly. This limitation could impact the bank’s efficiency and profitability, as expense leverage is an important driver for financial institutions to maximize their income relative to costs. InvestingPro’s Financial Health assessment rates Zions as "GOOD" with an overall score of 2.72, suggesting reasonable operational efficiency despite these challenges.
Lastly, Jefferies raises concerns about Zions Bancorp’s exposure to commercial real estate (CRE), which the firm considers above-average. The bank’s vulnerability to credit deterioration in this area is seen as a potential risk, particularly if the CRE market faces challenges.
Jefferies’ initiation of coverage on Zions Bancorp with an Underperform rating and a $40 price target sets a cautious tone for the bank’s investment outlook. The report provides a detailed rationale for the rating, focusing on comparative earnings growth, capital adequacy, expense management, and credit exposure.
In other recent news, Zions Bancorp reported first-quarter 2025 earnings that fell short of analyst expectations, posting net earnings of $169 million, or $1.13 per diluted share, compared to the anticipated $1.19 per share. Despite this miss, earnings increased by 18% from the previous year, reflecting a positive growth trend. The results were affected by an $0.11 per share charge due to a Utah tax law change, though this is expected to accrete back into income over time.
The bank also completed a branch acquisition in California, adding $630 million in deposits and $420 million in loans. Stephens analysts adjusted their price target for Zions Bancorp to $52, maintaining an Equal Weight rating, following the company’s quarterly performance where operating earnings per share surpassed expectations, but pre-provision net revenue fell short. DA Davidson revised its price target to $57, reaffirming a Buy rating, and noted the bank’s strategy to achieve positive operating leverage.
Zions Bancorp’s management remains optimistic about achieving 100-200 basis points of positive operating leverage in the first quarter of 2026. Credit quality indicators, such as nonperforming assets and net charge-offs, remained stable. Both DA Davidson and Stephens highlighted the bank’s strategic measures to navigate current economic conditions, with differing views on the stock’s valuation.
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