On Tuesday, Piper Sandler adjusted its outlook on shares of Midland States Bancorp (NASDAQ:MSBI), elevating the price target to $27.00 from the previous $26.00, while retaining a Neutral stance on the stock.
The revision follows Midland States Bancorp's third-quarter financial performance, which exhibited several positive aspects, including pre-provision net revenue (PPNR) that surpassed expectations. This was attributed to a higher-than-anticipated net interest income (NII) and core fee income.
Although nonperforming loans (NPLs) inflows decelerated and nonperforming assets (NCOs) remained focused within MSBI's LendingPoint and equipment finance portfolios, which are both in the process of being wound down, the analyst expressed optimism. Despite the increased number of nonperforming loans and substandard loans, the analyst sees these as isolated issues within specific segments of the bank's portfolio.
Piper Sandler's analyst highlighted the bank's long-term horizon for achieving profitability comparable to its peers and the need for consistent credit improvement before adopting a more favorable rating. The firm's stance remains cautious due to these factors, which are believed to influence the bank's valuation in comparison to its peers.
The earnings per share (EPS) estimates for the fourth quarter of 2024 and the full year of 2025 were also revised upwards to $0.73 and $2.70, respectively, from the prior estimates of $0.67 and $2.60. These adjustments reflect the positive expectations for net interest income (NII) and net interest margin (NIM) following the bank's third-quarter results.
The new stock price target of $27.00 is based on a 10.0 times multiple of the estimated 2025 earnings per share, which represents a discount to the peer group average of 10.8 times. This discount acknowledges the profitability and credit concerns that have been factored into the bank's current assessment.
In other recent news, Midland States Bancorp has been the subject of several updates from financial analysts. Piper Sandler revised its price target for the company to $27.00, up from $25.50, while maintaining a neutral rating.
The adjustment followed the company's second-quarter results, which fell short of expectations due to factors such as an elevated loan loss provision, increased operating expenses, and reduced net interest income.
The company's credit quality was highlighted as mixed, with an increase in non-performing loans within certain portfolios. However, there was a noted decrease in net charge-off levels and a decline in substandard loans. Piper Sandler's outlook remains cautious, leading to reduced earnings per share estimates for 2024 and 2025.
In further developments, the company announced the appointment of Travis Franklin to its Board of Directors. Franklin, currently Executive Vice President and Chief Financial Officer of Heartland Dental, LLC, will bring his extensive experience in business management and finance to the board.
In other analyst updates, DA Davidson, Keefe, Bruyette & Woods, and Stephens all reduced their price targets for Midland States Bancorp due to lowered expectations for net interest income and anticipated increases in credit costs. Despite these adjustments, these firms maintained their ratings on the company's stock, reflecting a cautious perspective on the bank's financial outlook.
InvestingPro Insights
To complement Piper Sandler's analysis of Midland States Bancorp (NASDAQ:MSBI), recent data from InvestingPro offers additional perspective on the bank's financial position and market performance.
As of the latest available data, MSBI's market capitalization stands at $527.79 million, with a price-to-earnings (P/E) ratio of 10.75. This relatively low P/E ratio, coupled with a price-to-book ratio of 0.75 for the last twelve months ending Q3 2024, suggests that the stock may be undervalued compared to its book value and earnings potential.
InvestingPro Tips highlight that MSBI has raised its dividend for 8 consecutive years and maintained dividend payments for 9 consecutive years. This consistent dividend policy is reflected in the current dividend yield of 5.03%, which may be attractive to income-focused investors. The bank's commitment to shareholder returns aligns with Piper Sandler's observation of the bank's long-term profitability goals.
Despite the positive dividend track record, InvestingPro data indicates that MSBI's revenue growth for the last twelve months ending Q3 2024 was -15.35%, with a quarterly revenue decline of 3.25% in Q3 2024. This decline in revenue supports Piper Sandler's cautious stance and the need for consistent improvement before a more favorable rating can be considered.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for MSBI, providing a deeper understanding of the bank's financial health and market position.
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