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On Wednesday, Raymond (NSE:RYMD) James analyst Michael Rose elevated South State Corporation’s (NYSE:SSB) stock rating from Outperform to Strong Buy, albeit with a reduced price target of $115.00, down from $120.00. The upgrade reflects confidence in the bank’s position following its acquisition of IBTX, which is expected to offer ongoing benefits. Rose pointed out that South State’s risk estimates appear more favorable compared to its peers, due to the credit protection gained from marking IBTX’s balance sheet and South State’s proven strong underwriting history. These factors are believed to provide a buffer against potential economic downturns. The analyst’s target falls within the broader Wall Street range of $109-$135, with the consensus recommendation leaning strongly bullish at 1.8.InvestingPro analysis reveals additional insights about South State’s financial strength, with comprehensive metrics and exclusive ProTips available to subscribers.
The analyst’s optimism is also based on South State’s valuation, which at 9.9 times its projected 2026 earnings per share (EPS), is slightly above the peer average of 9.7 times. The stock currently trades at a P/E ratio of 13x, which InvestingPro data suggests is high relative to near-term earnings growth. Despite South State’s modest year-to-date (YTD) underperformance of -6.79% compared to the bank sector’s -6.2% drop, Raymond James sees an improved risk-reward scenario for investors considering the stock. Notably, the company has maintained dividend payments for 29 consecutive years, demonstrating long-term financial stability.
The acquisition of IBTX by South State is a strategic move that has been recognized for its potential to contribute positively to the company’s financial health. The integration of IBTX’s balance sheet provides an additional layer of credit protection, which is a significant factor in the analyst’s assessment. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels, though the company maintains solid fundamentals with a market capitalization of $9.35 billion.
Rose’s commentary highlighted the importance of strong underwriting capabilities, especially in times when economic uncertainty may increase the risk of loan defaults. South State’s track record in this area offers reassurance to stakeholders that the bank is well-equipped to manage potential challenges.
In summary, the upgrade by Raymond James reflects a belief in South State’s ability to outperform its peers based on its recent acquisition, credit protection measures, and underwriting strengths. The adjustment in the price target to $115.00 from $120.00 accompanies this upgraded outlook, signaling a nuanced view of the bank’s future potential amid market dynamics.
In other recent news, South State Corporation reported robust financial results for the fourth quarter of 2024, surpassing both earnings and revenue expectations. The company achieved an earnings per share (EPS) of $1.93, exceeding the projected $1.66, while revenue reached $450.32 million, beating the anticipated $435.94 million. Additionally, South State completed a branch sale-leaseback transaction, resulting in a pre-tax gain of approximately $229 million, and undertook a securities restructuring of a similar amount. The company has also received the Federal Reserve Board’s nonobjection to its 2025 stock repurchase program, allowing for the repurchase of up to 3 million shares, representing about 3% of its outstanding shares.
In terms of strategic moves, South State successfully acquired Independent (LON:IOG) Financial, which strengthens its market presence in high-growth areas such as Texas and the Southeastern U.S. Citi analyst Benjamin Gerlinger adjusted the stock’s price target from $128 to $123 while maintaining a "Buy" rating, following these developments. Gerlinger also noted South State’s effective management of promotional CD rates, which have seen a significant decrease. The company anticipates mid-single-digit loan growth in 2025 and projects a net interest margin (NIM) between 3.60% and 3.70% for the first quarter of 2025, with expectations to end the year between 3.75% and 3.85%.
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