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Tuesday, Jefferies initiated coverage on shares of Cullen/Frost Bankers (NYSE:CFR) with an underperform rating, setting a price target of $105. The research firm cited concerns over the bank’s valuation and earnings growth prospects despite acknowledging the strength of its deposit base and capital position. According to InvestingPro data, the bank currently trades at a P/E ratio of 14.37 and has a market capitalization of $8.45 billion. Analysis suggests the stock is trading above its Fair Value.
In their report, Jefferies analysts pointed out that Cullen/Frost has a robust deposit base and a solid capital position, which are impressive aspects of the bank’s financial health. The bank has demonstrated remarkable consistency in shareholder returns, having raised its dividend for 32 consecutive years, as highlighted by InvestingPro. Nonetheless, they also noted that the bank is trading at a significant premium compared to its peers, which raises questions about the sustainability of its stock price.
The analysts elaborated that Cullen/Frost’s earnings growth expectations are below average. This outlook, combined with the bank’s premium valuation, makes the current stock price less appealing to Jefferies in the short term. While InvestingPro data shows eight analysts have revised their earnings upwards for the upcoming period, the bank’s PEG ratio of 1.87 suggests it’s trading at a high multiple relative to its growth rate. The firm suggests that for a more favorable view of the bank’s stock, there needs to be evidence of positive operating leverage that could lead to improved earnings growth. Discover 10+ additional exclusive insights and detailed valuation metrics with an InvestingPro subscription.
Jefferies’ price target of $105 for Cullen/Frost Bankers represents their assessment of the stock’s value, factoring in the challenges and strengths identified in their analysis. This target is intended to reflect what the analysts believe is a fair valuation for the bank’s shares in the context of the broader banking sector.
The initiation of coverage by Jefferies on Cullen/Frost Bankers provides investors with a new perspective on the bank’s financial performance and stock valuation. The underperform rating suggests that the analysts expect the bank’s stock to perform less favorably than the overall market or its sector in the near term.
In other recent news, Cullen/Frost Bankers reported a strong first-quarter earnings per share (EPS) of $2.30, surpassing estimates from both BofA Securities and consensus figures. This performance led BofA Securities to raise its price target for the company to $145 while maintaining a Buy rating. The bank’s updated guidance indicates an expected net interest income growth of 5% to 7% for the full year 2025, reflecting confidence despite anticipated interest rate cuts. Evercore ISI upgraded Cullen/Frost’s stock rating from Underperform to In Line, adjusting the price target to $132 due to improved earnings projections and solid credit trends. Stephens also raised its price target to $141, citing stronger-than-expected revenue performance and positive growth trends. DA Davidson increased its price target to $135, maintaining a Neutral rating, noting Cullen/Frost’s consistent outperformance and strategic expansion initiatives. The company’s ability to exceed consensus estimates in 23 of the last 25 quarters highlights its reliable financial guidance and market share growth. These developments underscore the bank’s robust financial standing and strategic positioning in the market.
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