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Keefe, Bruyette & Woods has updated its outlook on First Business Financial Services (NASDAQ: NASDAQ:FBIZ), increasing the price target to $51 from the previous $48, while maintaining an Outperform rating on the company's stock.
The adjustment comes on the back of First Business Financial reporting earnings of $1.23 per share, surpassing expectations due to a robust pre-provision net revenue (PPNR), a lower provision for credit losses, and a reduced tax rate.
The company's PPNR saw benefits from an improved net interest income (NII), attributed to a better net interest margin (NIM) and a slightly smaller earning asset (EA) base, said an analyst from Keefe, adding that the improvement was significant enough to offset a minor decline in fee income and an uptick in expenses.
First Business Financial also experienced double-digit loan growth, with a 10% increase on a linked quarter annualized (LQA) basis, driven by mid-teen growth in commercial and industrial (C&I) loans.
The improved NIM, which rose by 7 basis points quarter over quarter, is expected to continue supporting a positive outlook for the company's NII. Alongside this, a lower provision for credit losses and stable expenses, albeit partially counterbalanced by a dip in fee income, has led to an increase in earnings estimates by 1% for 2024 and 2% for 2025.
To be sure, First Business maintained its quarterly cash dividend at $0.25 per common share, signaling a stable return for its investors. This dividend, based on the company's first-quarter 2024 earnings per share, signifies a 24% dividend payout ratio.
InvestingPro Insights
InvestingPro data shows that First Business Financial Services (NASDAQ:FBIZ) has a market capitalization of $377.15M and is trading at a P/E ratio of 9.95, which suggests that the stock may be undervalued relative to its earnings. The company has demonstrated a solid performance with a revenue growth of 3.9% over the last twelve months as of Q2 2024. Additionally, First Business Financial has shown strong returns with a 1 month price total return of 23.52% and a 3 month price total return of 38.61%.
Among the InvestingPro Tips, it's notable that First Business Financial has raised its dividend for 11 consecutive years and maintained dividend payments for 20 consecutive years. This consistent dividend growth, paired with the recent significant return over the last week, month, and quarter, underscores the company's strong financial position and may appeal to income-focused investors. For those interested in further insights, there are additional InvestingPro Tips available, which could provide a deeper analysis of the company's performance and outlook. To access these tips and more detailed analytics, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
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