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On Wednesday, Keefe, Bruyette & Woods updated their assessment of Community Financial System (NYSE:CBU), increasing the price target from $74.00 to $76.00, while keeping a Market Perform rating on the stock. The firm's analyst, Christopher O'Connell, cited the company's continued net interest margin (NIM) expansion as a key driver behind the adjustment.
Community Financial System recently reported a strong fourth quarter, surpassing expectations with a 15 basis points NIM expansion. The company has demonstrated robust growth with revenue increasing by 12.93% over the last twelve months. The performance led to the company's shares outperforming the market by approximately 220 basis points. O'Connell noted that the results were slightly below the anticipated 5-6% earnings per share revisions, primarily due to coming into the quarter below consensus.
The analyst expects that Community Financial will maintain its margin expansion, although at a decelerated pace. O'Connell highlighted the company's favorable position in the current environment, given its low proportion of floating rate loans at just 11%, and the ongoing repricing of back book loans. Additionally, he pointed out that Community Financial's fee businesses are expected to continue growing at a mid- to high-single-digit rate.
O'Connell's analysis suggests that Community Financial's above-peer profitability is likely to persist, supporting the company's historical valuation premium. The new price target of $76.00 is based on 19 times the estimated 2025 earnings and 16.5 times the estimated 2026 earnings.
In summary, Keefe, Bruyette & Woods sees a positive outlook for Community Financial System, with a steady path of profitability underpinned by strategic loan pricing and growth in fee-based businesses.
In other recent news, Community Bank System has reported its fourth-quarter earnings and revenue for 2024, both of which have topped analyst expectations. The financial services firm posted adjusted earnings per share (EPS) of $1.00, surpassing the analyst consensus of $0.90. Additionally, revenue was reported at $196.28 million, exceeding the estimated $191.08 million and marking a 10.9% increase from the same quarter in the previous year.
Community Bank System also reported a net income of $49.8 million for the fourth quarter, up from the previous year. The firm achieved record quarterly total revenues of $196.3 million, driven by strong performance across its business segments. Net interest income reached a new quarterly high of $120.0 million, up 9.9% year-on-year.
The company's loan portfolio grew by 7.5% year-on-year to $10.43 billion, while total deposits increased 4.0% to $13.44 billion compared to the end of the previous year. Community Bank System maintained a solid capital position, with a Tier 1 leverage ratio of 9.19%, well above the regulatory well-capitalized standard of 5.0%. These are recent developments that highlight the company's financial performance.
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