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On Thursday, Piper Sandler adjusted its outlook on Commerce Bancshares (NASDAQ:CBSH) stock, raising the price target to $72 from the previous $69, while maintaining a Neutral rating. The revision reflects Piper Sandler's expectation of the bank's continued strong profitability, particularly due to the anticipated benefits from fewer Federal Reserve rate cuts this year on the bank's net interest income (NII), given its asset-sensitive balance sheet. The bank, currently valued at $8.78 billion, has demonstrated its resilience with a remarkable 29.29% return over the past year.
Commerce Bancshares is seen as a solid investment in times of market uncertainty, as noted by Piper Sandler, due to its "pristine credit profile, enviable revenue diversity, and defensible above-average profitability profile." The bank's strong fundamentals are reflected in its "GOOD" Financial Health Score on InvestingPro, which also indicates the stock is slightly undervalued based on its proprietary Fair Value model. Despite these strengths, the firm's analysts are not changing their neutral stance on the stock because they perceive limited opportunities for additional valuation growth. The current premium valuation of Commerce Bancshares stands at 16.4 times Piper Sandler's estimated 2025 earnings per share (EPS), compared to its peers' average of 13.6 times.
The bank's favorable position to generate profitability above the industry average is acknowledged, yet the analysts also recognize that the visibility into stronger loan growth or the use of excess capital remains unclear. This tempered outlook is coupled with a lack of clear catalysts that could further drive up the bank's valuation. Notably, InvestingPro data reveals the bank has maintained dividend payments for 54 consecutive years, demonstrating consistent shareholder returns despite market cycles.
Piper Sandler has increased its EPS estimates for Commerce Bancshares for the years 2025 and 2026 by 5% and 4%, respectively, to $4.00 and $4.10. This adjustment incorporates an improved forecast for the bank's NII and operating expenses. The new price target of $72 is based on an 18.0 times multiple of the estimated 2025 EPS, which aligns with Commerce Bancshares' historical long-term premium over its peers.
In other recent news, Commerce Bancshares reported robust fourth quarter earnings that surpassed analyst estimates. The bank revealed earnings of $1.01 per share, exceeding the consensus estimate of $0.92, and revenue of $422.08 million, surpassing expectations of $416.66 million. The company's net interest income rose to $266.6 million, up from $262.4 million in the previous quarter, despite a slight dip in the net yield on interest-earning assets.
In addition to this, non-interest income amounted to $155.4 million, representing 36.8% of total revenue. The bank also reported strong credit quality, with non-accrual loans at 0.11% of total loans, and an increase in the allowance for credit losses on loans to $162.7 million. Average deposits saw an increase of $588.1 million compared to the third quarter.
Furthermore, Commerce Bancshares' book value per share rose 14.5% year-over-year to $24.84, and the company's tangible common equity to tangible assets ratio grew 107 basis points to 9.92%. For the full year 2024, the bank reported net income of $526.3 million, a notable increase from $477.1 million in 2023. These are the recent developments concerning Commerce Bancshares.
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