First Mid-Illinois stock downgraded as upside looks limited after strong gains - Keefe

On Wednesday, Keefe, Bruyette & Woods adjusted their stance on First Mid-Illinois Bancshares (NASDAQ:FMBH) stock, listed on NASDAQ:FMBH, shifting from an "Outperform" rating to "Market Perform." The firm has set a price target for the bank's shares at $42.00. This change follows the recent publication of a report by the KBW bank team that examines strategies for lower interest rates.

Since initiating coverage on September 24, 2023, Keefe, Bruyette & Woods had maintained an "Outperform" rating on First Mid-Illinois Bancshares. The decision to downgrade reflects the firm's assessment that the stock's potential upside has largely been realized after its recent strong performance. Consequently, the shares are now trading at a premium compared to their industry peers.

The bank's stock has been positively noted for its robust deposit franchise and the expectation of solid performance throughout economic cycles. This is supported by First Mid-Illinois Bancshares' consistent mid- to high-single-digit organic loan growth, a business mix that includes approximately 30% non-interest income, and a track record of stable credit performance.

Despite the downgrade, the firm's outlook for First Mid-Illinois Bancshares remains optimistic. Keefe, Bruyette & Woods anticipate that the bank will continue to demonstrate strong performance. This is attributed to its solid business fundamentals, which include a strong deposit base and a diversified business model.

The price target of $42.00 remains unchanged from the firm's previous assessments, indicating that while the rating has been adjusted, the firm's valuation of First Mid-Illinois Bancshares' stock holds steady. This suggests that while the immediate growth potential may be limited, the bank's long-term prospects are still viewed favorably.

InvestingPro Insights

Recent data from InvestingPro provides additional context to Keefe, Bruyette & Woods' assessment of First Mid-Illinois Bancshares (NASDAQ:FMBH). The company's P/E ratio of 12.14 suggests that the stock is trading at a relatively modest valuation, despite the recent strong performance noted in the report. This could indicate that there's still room for growth, even as the stock approaches its 52-week high, currently trading at 92.03% of that peak.

InvestingPro Tips highlight FMBH's strong dividend history, having raised its dividend for 13 consecutive years and maintained payments for 25 years. This aligns with the bank's reputation for stability mentioned in the article. The company's revenue growth of 19.08% over the last twelve months and a robust operating income margin of 37.45% further support the firm's positive outlook on FMBH's business fundamentals.

It's worth noting that InvestingPro offers 9 additional tips for FMBH, providing investors with a more comprehensive analysis of the company's financial health and market position.

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