On Friday, RBC Capital adjusted its outlook on shares of Toronto-Dominion Bank (NYSE:TSX:TD), reducing the price target to $77.00 from the previous $82.00. The stock, currently trading at $52.80 and down 14.12% year-to-date, has maintained its Sector Perform rating. The revision follows Toronto-Dominion's strategic review announcement, which RBC Capital views as a considerable chance for the bank to reassess its overall strategy.
Toronto-Dominion Bank, with a market capitalization of $92.19 billion, is currently facing operational constraints, which are expected to keep costs high throughout the forecast period set by RBC Capital.
The analyst projects approximately 1% core earnings per share (EPS) growth for the bank in 2025, which is noted as the lowest core EPS growth expectation among its peer group. InvestingPro data reveals that three analysts have recently revised their earnings downward for the upcoming period, though the bank maintains a strong tradition of dividend payments, having raised them for 14 consecutive years.
The bank recently reported an adjusted EPS of $1.72, which fell short of RBC Capital's estimate of $1.82. With the bank's acknowledgment that earnings growth in 2025 may prove difficult, Toronto-Dominion has also decided to suspend its medium-term financial objectives. These objectives included targets for EPS growth, return on equity (ROE), and operating leverage.
RBC Capital's revised price target reflects the challenges Toronto-Dominion Bank may face in achieving growth in the upcoming years. The bank's strategic review is seen as a pivotal moment for it to recalibrate its approach to navigate through the mentioned constraints effectively.
In other recent news, Toronto-Dominion Bank (TD Bank) experienced a decrease in its Q4 earnings, with adjusted earnings per share of C$1.72, falling short of the consensus estimate of C$1.83. However, the bank exceeded revenue expectations, reporting C$15.51 billion, a 33% rise year-over-year, surpassing the projected C$12.71 billion.
Scotiabank (TSX:BNS) has downgraded TD Bank's stock from Sector Outperform to Sector Perform, while Desjardins has downgraded the stock to Hold from Buy. Both firms have adjusted their price targets, Scotiabank to C$81.00 and Desjardins to C$80.
TD Bank's adjusted net income decreased by 8% year-over-year to C$3.21 billion due to increased provisions for credit losses and higher expenses. Despite these challenges, the Canadian Personal and Commercial Banking segment reported a 9% increase in net income to C$1.82 billion.
On the other hand, the U.S. Retail Bank segment saw a 12% decline in adjusted net income to US$689 million. The bank has indicated that earnings growth may be challenging in fiscal 2025 due to a "transition year" and investments in risk management and control infrastructure. It is important to note that these are recent developments.
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