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On Thursday, Stephens analyst Andrew Terrell revised the price target for Cathay General Bancorp (NASDAQ:CATY) shares, reducing it to $57 from the previous $60, while maintaining an Overweight rating on the stock. According to InvestingPro data, CATY currently trades at an attractive P/E ratio of 12.25 and shows signs of being undervalued based on its Fair Value analysis. Terrell's assessment followed Cathay General Bancorp's fourth-quarter performance, which revealed operating earnings per share (EPS) of $1.13, surpassing both Stephens' estimate of $1.09 and the consensus of $1.10. The pre-provision net revenue (PPNR) of $101.6 million slightly exceeded Stephens' expectations by 0.9% but fell short of the consensus estimate by 0.2%, primarily due to higher expenses.
The bank's net interest income (NII) was reported to be 0.7% above consensus predictions, with a net interest margin (NIM) that was 2 basis points better than anticipated. However, the quarter was not without its challenges, as Cathay General Bancorp experienced elevated net charge-offs (NCOs) at 0.34%, attributed to one commercial and industrial shared national credit (C&I SNC). Additionally, there was a significant increase in special mention loans, rising by $90 million to a total of $293 million.
Despite these credit concerns, Terrell expressed a positive outlook on the bank's performance. For 2025, Cathay General Bancorp provided guidance that suggests potential for an earnings catalyst throughout the year, with NIM expected to range between 3.10% and 3.20%. While InvestingPro analysis indicates net income may face headwinds this year, the bank maintains a GOOD overall financial health score, suggesting resilience in its operations. Stephens forecasts a NIM of 3.27% for the fiscal year 2025. Furthermore, Terrell adjusted the operating EPS forecast for 2026 to $5.00, down from the previous $5.23, while reiterating the Overweight rating.
The Overweight rating implies that Stephens analysts anticipate the stock to outperform either the industry or the overall market over a certain period. Terrell's commentary on the quarter acknowledged the solid aspects of Cathay General Bancorp's performance while also recognizing the areas of concern, particularly regarding credit metrics. The revised price target of $57 reflects a tempered yet still optimistic view of the bank's stock value going forward.
In other recent news, Cathay General Bancorp has outperformed Q3 2024 predictions, with earnings per share (EPS) reaching $1.12, surpassing the projected $1.10. The company's revenue also exceeded expectations, coming in at $186.48 million against a forecast of $185.63 million. The company announced a continuation of its stock buyback program, with $35 million planned for Q4 2024 and Q1 2025. However, loan growth for 2024 is projected to be between -1% and 0%.
Cathay General Bancorp demonstrated resilience in Q3 2024, with net income increasing to $67.5 million, a 1% rise from the previous quarter. The company's net interest margin rose to 3.04%, up from 3.01% in Q2. However, the Tier 1 leverage capital ratio saw a slight decrease to 10.2%.
Looking forward, Cathay General Bancorp expects its net interest margin to range between 3.05% and 3.10%. CFO Heng Chang noted, "With the Fed starting the rate cutting cycle, our net interest margin appears to have bottomed out and begun to increase." CEO Chang Liu added, "We expect loan growth for 2024 to be between -1% and 0% based on the loan trends so far in 2024." These are recent developments that investors should consider.
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