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Tuesday, Keefe, Bruyette & Woods (KBW) maintained their Outperform rating on Renasant Corp (NYSE: NYSE:RNST) with a steady price target of $45.00. According to KBW, the recent acquisition of First Bancshares (FBMS) is anticipated to enhance Renasant's profitability, with a return on assets (ROA) increase of 30 basis points, reaching between 1.20% and 1.30%.
This deal is also expected to strengthen Renasant's balance sheet, characterized by a manageable commercial real estate ratio of 276%, a robust liquidity level with 11% in cash, and a high Common Equity Tier 1 (CET1) ratio exceeding 11%.
The firm's analysts highlighted the relative value of Renasant's stock, trading at 10.4 times the estimated 2026 earnings, which represents a 10% discount to its historical price-to-earnings (P/E) ratio. They pointed out that Renasant's stock has underperformed compared to other stocks involved in acquisitions, presenting what they consider a compelling opportunity to invest in the "buy the buyers" theme heading into 2025. InvestingPro analysis reveals that Renasant has maintained dividend payments for 32 consecutive years, demonstrating strong financial stability. The stock currently trades at a P/E ratio of 11.56, with analyst targets ranging from $37 to $45.
Renasant's current valuation was also noted as attractive by KBW, with the stock trading at 12.1 times the estimated 2025 earnings, and 1.6 times the pro forma tangible book value. Additionally, when compared to the full run-rate 2026 estimated earnings per share (EPS), Renasant's P/E is at a 6% discount to the KBW Regional Banking Index (KRX) at 11.1 times, an 8% discount to the six-year median P/E of 11.6 times, and a 21% discount to P/E ratios during the first Trump administration.
The positive outlook from KBW analysts comes from their "Holiday Opportunities" series, which identifies potential investment opportunities. They believe that Renasant's stock offers a compelling risk/reward proposition for investors, particularly in light of its valuation and the potential growth leverage from the FBMS deal.
For a comprehensive analysis of Renasant's valuation and growth prospects, investors can access the detailed Pro Research Report available on InvestingPro, which provides in-depth analysis of the company's financial metrics, market position, and growth potential among 1,400+ top US stocks.
In other recent news, Renasant Corporation, a Mississippi-based commercial banking institution, has announced significant executive leadership changes, including the transition of C. Mitchell Waycaster from his CEO role as part of a succession strategy. Waycaster's salary will be adjusted to 60% of its value prior to the transition date, starting on the transition date. He will also receive a $100,000 retention bonus and equity awards for 2025 and 2026.
Renasant Corporation has also reported strong financial results for the third quarter, including earnings of $72.5 million, or $1.18 per diluted share. This was boosted by a significant after-tax gain of $39 million from the sale of an insurance agency. Net interest income saw an increase of $6 million due to higher loan yields, and total deposits grew by over $285 million.
In addition to the leadership changes and financial performance, Renasant Corporation announced the adoption of amended and restated bylaws. The company also received approval for a merger with The First Bancshares (NYSE:FBMS), Inc. The merger agreement received overwhelming support from shareholders, with 51,923,496 votes in favor. The merger is expected to close in the first half of 2025.
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