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On Thursday, JPMorgan analysts maintained their Underweight rating on US Bancorp shares (NYSE:USB), currently trading at $37.82, with a price target of $43.50. The bank stock, which offers a compelling 5.29% dividend yield and has raised dividends for 14 consecutive years, trades at a modest 10.8x P/E ratio. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value metrics. The firm highlighted that US Bancorp reported first-quarter earnings per share (EPS) of $1.03, noting a small loan loss reserve release, which is not as significant as some of its peers. The analysts observed that the impact of tariffs on the economy and on US Bancorp’s businesses and earnings might be less than expected due to some dialing back of tariffs, but the situation remains uncertain and comparable to its peers, as the economic landscape is continuously changing. The stock has faced significant pressure, declining 22.61% over the past six months, though analysts project improved earnings with an EPS forecast of $4.29 for fiscal year 2025.
The analysts pointed out several key issues in US Bancorp’s recent performance. They noted that the results were affected by a sharp rise in other income and large fluctuations in Mortgage Servicing Rights (MSR) amortization expenses, which obscured the clarity of revenues. Additionally, they mentioned the likelihood of continued auto securitizations following a rapid decline in auto loans in the first quarter, adding complexity to the company’s financials, a trend that also occurred under the previous CEO.
The JPMorgan team also provided an outlook for US Bancorp’s net interest income, suggesting that the net interest margin could increase over the next couple of years under favorable conditions. However, this potential improvement may be partially negated by a slower growth in earning assets. In terms of credit performance, the analysts noted that US Bancorp has been outperforming peers with its current credit card yields, but warned that a slowing economy could lead to greater catch-up in loan losses.
Furthermore, JPMorgan recognized US Bancorp’s effective management in growing capital markets fees, indicating that the company continues to perform well in this area. Despite these various observations, the firm has decided to maintain its Underweight rating and $43.50 price target on US Bancorp shares. For deeper insights into US Bancorp’s valuation and growth prospects, InvestingPro subscribers can access comprehensive financial health scores, additional ProTips, and detailed research reports that transform complex Wall Street data into actionable intelligence.
In other recent news, U.S. Bancorp (BVMF:USBC34) reported strong financial results for the first quarter of 2025, with earnings per share (EPS) of $1.30, surpassing the forecasted $0.98. The bank’s revenue reached $6.96 billion, slightly above the expected $6.91 billion. Despite this positive earnings surprise, Raymond (NSE:RYMD) James adjusted its outlook on U.S. Bancorp, cutting the stock price target to $51 from $57 while maintaining an Outperform rating. The financial institution’s management of operating costs resulted in significant positive operating leverage, reinforcing confidence in its strategic direction.
Additionally, U.S. Bancorp launched a new product, BankSmartly, targeting affluent customers, which aligns with its guidance of a full-year revenue growth target of 3-5%. The bank also reported stable net interest income of $4.12 billion and a 5% increase in non-interest income year-over-year. CEO Gunjan Kedia emphasized the company’s focus on organic growth and risk management, highlighting their commitment to restoring investor confidence. The bank’s performance metrics have been robust, with a return on tangible common equity at 17.5% and an improved net charge-off ratio of 0.59%.
Analyst Michael Rose from Raymond James commended U.S. Bancorp for upholding its revenue and positive operating leverage projections for 2025, despite economic uncertainties. The bank anticipates modest loan growth and projects a 3% net interest margin by 2026-2027, while expecting two Federal Reserve rate cuts in the coming months. These developments suggest U.S. Bancorp is well-positioned to navigate the current financial landscape and deliver value to shareholders.
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