TSX runs higher on rate cut expectations
On Tuesday, Jefferies began coverage on KeyCorp (NYSE:KEY) shares, assigning a "Hold" rating and setting a price target at $18.00. The research firm’s position reflects a cautious optimism about the company’s financial prospects, balanced by concerns over the broader economic environment. With a market capitalization of $17.9 billion, KeyCorp’s stock currently trades near its InvestingPro Fair Value, suggesting balanced valuation levels. The stock has shown resilience with a 14% return over the past year, despite recent market volatility.
KeyCorp’s diversified revenue streams and strong relative capital position were acknowledged by Jefferies as positive factors. Additionally, the anticipated increase in net interest income (NII) following the company’s investment in Scotiabank (TSX:BNS), which is expected to contribute to a 20% NII growth in FY25, was highlighted as a key driver for KeyCorp’s future performance. The company maintains a notable 5% dividend yield and has consistently paid dividends for 54 consecutive years, according to InvestingPro data.
However, Jefferies pointed out that the current economic uncertainty poses potential risks to KeyCorp’s growth trajectory. This caution is reflected in the price target, which aligns closely with the company’s valuation relative to its peers. KeyCorp’s valuation is noted at 9.8 times its projected 2026 earnings, compared to the 9.9 times median of its peers. InvestingPro analysis reveals a "Weak" overall financial health score, with analysts maintaining a moderate consensus rating of 2.09 (on a scale where 1 is Strong Buy and 5 is Strong Sell).
The Hold rating suggests that Jefferies believes KeyCorp’s stock is fairly valued at its current levels, taking into account both the company’s strong points and the possible challenges it may face in a fluctuating economic climate.
Investors and market watchers will likely monitor KeyCorp’s stock performance in the coming months, as the company strives to capitalize on its strategic investments and navigate through economic uncertainties. The financial sector, as a whole, remains under close scrutiny as firms adjust to changing market conditions and interest rate environments.
In other recent news, KeyCorp reported its financial results for the first quarter of 2025, surpassing analysts’ expectations. The company achieved earnings per share of $0.33, slightly above the forecasted $0.32, and reported revenue of $1.8 billion, exceeding the anticipated $1.75 billion. Additionally, KeyCorp declared dividends for the second quarter of 2025 for both common and preferred shares, with the common share dividend set at $0.205 per share. In shareholder news, all fifteen director nominees proposed by the Board of Directors were elected at the company’s Annual Meeting, and Ernst & Young LLP was ratified as the independent auditor for fiscal year 2025. Analyst feedback from firms such as Wells Fargo (NYSE:WFC) and Morgan Stanley (NYSE:MS) indicates a positive outlook on KeyCorp’s strategic positioning and capital management. The company maintains a strong capital position with a CET1 ratio of 11.8%, and it has authorized a $1 billion share repurchase plan. KeyCorp’s commitment to returning value to shareholders is evident through these recent developments.
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