On Monday, Piper Sandler adjusted its outlook on shares of First Interstate BancSystems (NASDAQ:FIBK), reducing the price target to $36 from $38 while maintaining an Overweight rating on the stock. The adjustment follows a revision of the earnings per share (EPS) estimates for the coming years, with a new 2024 estimate of $2.29 and 2025 estimate of $2.41, decreased from the previous $2.38 and $2.55, respectively.
The analyst cited several reasons for the lower price target and EPS estimates, including a smaller balance sheet (B/S), less net interest margin (NIM) expansion than anticipated, and higher loan loss provisions (LLPs). These factors were partially offset by a reduction in non-interest expenses (NIE). Additionally, a 2026 EPS estimate of $2.65 was established.
Despite the price target reduction, the new target of $36 still represents a 15.0 times multiple of the firm's estimated 2025 earnings, aligning with the target multiple set for Glacier Bancorp (NYSE:GBCI), which is at 18.0 times. The analyst expressed disappointment in the higher than expected net charge-offs (NCOs) but noted that the related issues appear to be resolved, and the bank is expected to continue performing well, with net interest income (NII) and NIM expansion anticipated to persist into the fourth quarter.
First Interstate BancSystems remains committed to its dividend, which currently yields 6.11%, as the company aims to grow into its payout ratio, which stands at 86%. The bank's dedication to its dividend is seen as a positive sign for shareholders, especially in the context of its financial growth strategy.
In other recent news, First Interstate BancSystems reported stable Q3 earnings, with a net income of $55.5 million or $0.54 per share. Barclays maintained its Equalweight rating on the company's stock, despite a minor shortfall in the operating earnings per share (EPS) of $0.55, which was $0.03 below the consensus estimate. The bank's credit trends showed improvement, despite losses primarily driven by two larger loans. Barclays has adjusted its EPS estimates for First Interstate BancSystems for the fiscal years 2024, 2025, and 2026.
In terms of leadership, outgoing CEO Kevin Riley introduced Jim Reuter as the new CEO. The company declared a dividend of $0.47 per share and expects continued margin expansion into 2025. Despite some credit losses, particularly in the metro-office portfolio, the overall credit quality has improved. Recent developments indicate a company navigating transitional periods and market uncertainties, with a focus on continued growth.
As First Interstate BancSystem prepares for a leadership change, the financial sector will be keenly observing the company's adaptation to these evolving circumstances.
InvestingPro Insights
To complement the analysis provided by Piper Sandler, recent data from InvestingPro offers additional perspective on First Interstate BancSystems (NASDAQ:FIBK). The company's P/E ratio of 13.57 suggests that the stock is trading at a relatively modest valuation compared to its earnings, which aligns with the analyst's maintained Overweight rating despite the lowered price target.
InvestingPro Tips highlight that FIBK has maintained dividend payments for 15 consecutive years, reinforcing the article's mention of the company's commitment to its dividend. This consistency is particularly noteworthy given the current high dividend yield of 6.07%, as reported by InvestingPro.
While the article discusses potential challenges, including higher loan loss provisions, it's worth noting that InvestingPro data shows FIBK has been profitable over the last twelve months, with analysts predicting continued profitability this year. This profitability, combined with the bank's dividend track record, may provide some reassurance to investors despite the lowered EPS estimates.
For readers interested in a more comprehensive analysis, InvestingPro offers 5 additional tips for FIBK, providing a deeper dive into the company's financial health and market position.
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