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On Tuesday, Morgan Stanley adjusted its outlook on KeyCorp (NYSE: NYSE:KEY), increasing the bank's price target from $18.00 to $20.00, while keeping an Equalweight rating on the stock.
The revision reflects the analyst's view that a capital raise will align KeyCorp's capital levels with those of its industry peers, enhancing the firm's confidence in KeyCorp's ability to capitalize on growth opportunities projected for 2025.
The analyst's commentary highlighted that KeyCorp's earnings per share (EPS) for 2025 are expected to see a modest increase of 1%, as the anticipated higher net interest income (NII) is likely to be mostly offset by the effects of share dilution.
Despite this dilution, the target multiple was raised to 11.5 times the projected 2025 EPS, signifying an improved stance on KeyCorp's capital position.
The adjustment in KeyCorp's price target comes after the company's initiative to raise capital, which is seen as a strategic move to strengthen its financial standing. This move is anticipated to enhance KeyCorp's ability to pursue growth initiatives and potentially increase shareholder value in the coming years.
KeyCorp's efforts to align its capital levels with those of its competitors is an important step towards ensuring financial stability and competitiveness. The bank's focus on growth opportunities in 2025 and beyond is reflected in the analyst's updated price target and valuation multiple.
In other recent news, Scotiabank has acquired a 14.9% stake in KeyCorp for $2.8 billion, marking a strategic move to penetrate the U.S. banking sector.
The transaction, set to occur in two phases, will make Scotiabank the largest investor in KeyCorp upon completion in fiscal 2025. In addition, Scotiabank will gain the right to appoint two directors to KeyCorp's board.
Meanwhile, Stephens has raised the price target for KeyCorp shares to $18.00, maintaining an Overweight rating. The adjustment follows KeyCorp's second quarter earnings report, which showed earnings per share of $0.25 and pre-tax, pre-provision net revenue of $452 million, approximately 3% above consensus estimates.
KeyCorp has reported a stable financial performance for the second quarter of 2024, with earnings of $237 million, or $0.25 per share. Despite a decline in investment banking fees, the company's revenue remained flat due to growth in other areas. KeyCorp's net interest income showed improvement from the previous quarter and is expected to continue its upward trajectory.
These are recent developments that investors should monitor closely.
InvestingPro Insights
As KeyCorp (NYSE: KEY) positions itself for future growth, recent data from InvestingPro offers additional context for investors considering the bank's prospects. The company's market capitalization stands at a robust $15.03 billion, underscoring its significant presence in the financial sector. Despite a challenging environment, KeyCorp has demonstrated a commitment to shareholder returns, boasting a notable dividend yield of 5.14%, which is particularly attractive for income-focused investors. This commitment is further evidenced by the fact that the company has raised its dividend for 13 consecutive years, a testament to its financial resilience and management's confidence in its long-term strategy.
Analysts following KeyCorp have taken a cautious stance, with 9 analysts revising their earnings downwards for the upcoming period, suggesting that investors may need to temper their short-term expectations. However, the bank's recent performance has shown a significant return over the last week, with a price total return of 11.78%. This short-term uptick may reflect market reactions to recent strategic moves or broader economic factors.
For those seeking a deeper analysis, InvestingPro offers additional InvestingPro Tips on KeyCorp, providing a comprehensive view of the company's financial health and market potential. Investors can access these insights to inform their investment decisions and stay ahead of market trends.
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