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On Thursday, Keefe, Bruyette & Woods, a financial services research firm, adjusted its price target for Commerce Bancshares stock, listed on (NASDAQ:CBSH), from $74.00 to $70.00. Despite the reduction, the firm continues to hold an Outperform rating on the bank’s shares.
The firm’s analyst, Christopher McGratty, recognized Commerce Bancshares’ recent performance as potentially the best for the current quarter, citing an across-the-board beat. The bank surpassed expectations with a $0.09 per share pre-provision net revenue (PPNR) surplus, attributed to both higher revenues and controlled expenses. Additionally, the bank’s credit quality was noted as best-in-class.
Commerce Bancshares is regarded as one of the highest quality and most defensive small to mid-cap (SMID-cap) banks in the market, with a current market capitalization of $8.08 billion. This is evident in its premium valuation, with a price to tangible book value (P/TBV) of 2.4 times and a P/E ratio of 16.56x. McGratty suggests that the bank’s quality premium is likely to continue as long as market and economic uncertainties remain high. Want deeper insights into Commerce Bancshares’ valuation metrics? InvestingPro offers exclusive financial analysis and additional ProTips.
The firm has raised its estimates for Commerce Bancshares but has decided to maintain its Market Perform (MP) rating. The bank’s stock performance has been comparatively resilient amidst economic uncertainty, with a year-to-date (YTD) decrease of 5% against the KBW Regional Banking Index’s (KRX) decline of 16%.
Investors are seen to favor Commerce Bancshares as a safe haven, reflected in its premium valuation of 2.4 times tangible book value and more than 14 times Keefe, Bruyette & Woods’ estimated earnings for 2025/2026. The analyst notes that the biggest risk to the bank’s significant year-to-date alpha would be a shift in investor sentiment to a risk-on approach. However, given the current uncertainties in the market, such a shift appears to be less likely at this time.
In other recent news, Commerce Bancshares has made several notable announcements and adjustments. The company reported a 7% increase in its quarterly dividend to $0.275 per share, highlighting its ongoing commitment to returning value to shareholders. This marks the 57th consecutive year of dividend growth for Commerce Bancshares. In terms of executive compensation, the bank has updated its structure, awarding cash bonuses and restricted stock to top executives, with the changes set to take effect in March 2025. These adjustments are part of the company’s routine review to maintain competitive compensation practices.
Analyst activity around Commerce Bancshares has also been significant. Morgan Stanley (NYSE:MS) upgraded the bank to Equal-weight from Underweight, citing its defensive position and strong capital levels, while Piper Sandler raised its price target to $72, reflecting confidence in the bank’s profitability amidst fewer anticipated Federal Reserve rate cuts. However, Piper Sandler maintained a Neutral rating, noting limited opportunities for additional valuation growth. The bank’s ability to reprice fixed-rate assets is expected to bolster its financial performance, with anticipated improvements in net interest margin and income. These developments collectively underscore Commerce Bancshares’ strategic maneuvers in navigating current economic challenges.
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