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Investing.com - Raymond (NSE:RYMD) James upgraded Cullen/Frost Bankers (NYSE:CFR) from Market Perform to Outperform on Tuesday, establishing a price target of $150.00. The bank, currently trading at a P/E ratio of 14.3x, has demonstrated remarkable dividend consistency, having raised its dividend for 32 consecutive years. According to InvestingPro analysis, the stock appears overvalued at current levels, though it has delivered a strong 42% return over the past year.
The upgrade is based on expected positive net interest margin (NIM) and net interest income (NII) benefits from repricing the bank’s large securities portfolio in a higher-for-longer rate environment. Cullen/Frost’s securities portfolio represents 39.3% of assets compared to the peer average of 20.4%, positioning it as the second-highest among peers. InvestingPro data reveals the bank maintains a solid financial health score, with particularly strong marks in profitability and price momentum metrics.
Raymond James noted that Cullen/Frost’s current guidance assumes four 25-basis-point rate cuts in 2025, with the bank expecting a $1.7-1.8 million positive monthly NII impact from any rate cut that doesn’t materialize. This factor could contribute to upward revisions to the bank’s 2025 NII outlook when it reports second-quarter earnings.
The firm also highlighted Cullen/Frost’s robust loan pipeline, which increased 27% quarter-over-quarter to $6.2 billion, suggesting potential for a second-quarter NII and earnings per share beat and a possible increase to its 5-7% full-year NII guidance.
While acknowledging that Cullen/Frost shares trade at premium multiples of approximately 2.7x price-to-tangible book value and 14x 2026 estimated earnings per share, Raymond James believes these premium valuations are justified and expects the stock to benefit from positive earnings revisions moving forward. With the next earnings report scheduled for July 24, InvestingPro notes that 4 analysts have recently revised their earnings estimates upward, suggesting growing confidence in the bank’s outlook. Discover more insights and 8 additional ProTips for CFR in the comprehensive Pro Research Report.
In other recent news, Cullen/Frost Bankers has reported notable developments that have captured investor attention. BofA Securities raised its price target for Cullen/Frost to $147, maintaining a Buy rating, and highlighted the bank’s 33% revenue growth from fiscal year 2022 to 2025. The firm also noted the importance of translating this growth into accelerating earnings per share (EPS) growth and improved returns. In contrast, Jefferies initiated coverage with an Underperform rating, setting a lower price target of $105 due to concerns over valuation and earnings growth prospects. Meanwhile, DA Davidson maintained a Neutral rating with a $135 price target, recognizing Cullen/Frost’s market share potential through branch expansion and strategic growth initiatives.
The bank’s first-quarter earnings report was a key factor in these assessments, with Cullen/Frost surpassing expectations by reporting an EPS of $2.30, above both BofA’s and the consensus estimates. This performance led BofA to increase its full-year 2025 and 2026 earnings estimates, reflecting confidence in the company’s outlook. Evercore ISI also upgraded the stock from Underperform to In Line, raising the price target to $132 and citing improved top-line forecasts and solid credit trends. These developments underscore a range of perspectives on Cullen/Frost’s valuation and growth potential, providing investors with varied insights into the bank’s financial health and strategic direction.
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