On Tuesday, Stephens, a financial services firm, raised its price target for South State Corporation (NYSE:SSB) shares to $105.00, up from the previous target of $101.00, while maintaining an Equal Weight rating on the stock. The adjustment followed South State's recent earnings report, which showed operating earnings per share (EPS) of $1.90, surpassing the consensus estimate of $1.65. This beat was attributed to a negative provision.
The company's core pre-provision net revenue (PPNR) of $183.4 million also exceeded the consensus forecast of $181.4 million by $2 million. This was despite a slight miss in net interest income (NII) by $0.06 and a 4 basis point compression in the net interest margin (NIM) to 3.40%, which was below the consensus of 3.46%.
Moreover, the end-of-period (EOP) loan balances were softer than expected, but core fees outperformed by $0.03, mainly due to correspondent banking activities, and are expected to reach the high end of the projected range. The company also reported lower expenses, which beat estimates by $0.03.
The revised stock price target takes into account updated assumptions for Independent Bank Group (NASDAQ:IBTX), including the impact of the mortgage warehouse exit and a projected increase in expenses for the 2026 fiscal year. Consequently, Stephens has lowered its PPNR expectations for South State by 2% for 2025 and 6% for 2026.
Despite these revisions, the analyst sees a positive financial outlook for South State, particularly praising the company's strategic use of excess capital to expand its market presence in the Southeast and accelerate the earnings potential of a quality bank with a liability-sensitive profile.
Moreover, Stephens anticipates that counter-cyclical fee catalysts in fixed income and mortgage sectors will become increasingly significant contributors to the company's performance in the 2025 fiscal year. The firm reiterated its Equal Weight rating, indicating a neutral stance on the stock's expected performance relative to the market or its sector peers.
In other recent news, South State Corporation has seen a flurry of activity. The company recently reported strong financial performance in its Q3 2024 Earnings Call, with growth in loans, deposits, revenue, and earnings per share. Furthermore, the company projects mid-single-digit growth and an improving yield curve for 2025.
Following this, Truist Securities adjusted its price target for South State Corporation shares to $103 from the previous $111, while retaining a Hold rating. The firm revised its Core EPS estimates for 2024, 2025, and 2026 upwards, citing increased fees, decreased provisioning for credit losses, and reduced expenses.
Piper Sandler also adjusted its stance on South State, raising its price target from $110 to $112. The firm cited effective expense management and the potential for further loan loss reserve releases as reasons for the adjustment.
Another significant development for South State is the ongoing merger with Independent Financial, expected to complete by summer 2025. This merger is anticipated to improve South State's balance sheet's liability sensitivity. These recent developments reflect the company's strategic approach towards growth amidst economic challenges.
InvestingPro Insights
South State Corporation's recent performance and Stephens' positive outlook are further supported by real-time data from InvestingPro. The company's P/E ratio of 15.08 suggests a reasonable valuation, especially considering its strong financial metrics. South State's revenue growth of 10.39% in the most recent quarter and an impressive operating income margin of 45.28% for the last twelve months indicate robust operational efficiency.
InvestingPro Tips highlight South State's commitment to shareholder value. The company has maintained dividend payments for 28 consecutive years and has raised its dividend for 13 consecutive years, demonstrating a strong track record of returning value to shareholders. This aligns well with Stephens' positive view on the company's strategic use of capital.
The stock's significant price appreciation, with a 53.89% total return over the past year and a 29.36% return over the last six months, reflects investor confidence in South State's performance and future prospects. This upward trend supports Stephens' decision to raise the price target.
For investors seeking more comprehensive analysis, InvestingPro offers 6 additional tips for South State Corporation, providing deeper insights into the company's financial health and market position.
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