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On Monday, Stephens, a financial services firm, downgraded First Busey (NASDAQ:BUSE) Corporation's stock (NASDAQ:BUSE) from Overweight to Equal Weight and reduced the price target to $27 from the previous $28. The adjustment follows investor reactions to First Busey's recent acquisition of CrossFirst, which have been largely tentative.
The analyst from Stephens pointed out that investor feedback after acquisition announcements is typically mixed. In this case, the market's response to First Busey's acquisition has been notably cautious.
Concerns raised by investors include the challenges that high-performing banks face when acquiring an underperforming one, differences in pricing and credit cultures, and the anticipated management changes that are expected to occur 12-18 months after the deal is finalized. Moreover, there is skepticism regarding the lower valuation projected for the combined entity post-acquisition.
Despite the downgrade, the analyst acknowledged First Busey's historical success in integrating acquisitions, expressing confidence in the management's ability to merge the two banks successfully. The analyst also believes that First Busey can achieve earnings per share (EPS) accretion and continue to expand its fee-based businesses into new markets.
However, the prevailing investor sentiment has led to a more cautious outlook for BUSE shares. With limited catalysts anticipated over the next year, the firm has opted to adopt a "wait-and-see" approach, which is reflected in the lowered rating and price target. The new price target of $27 represents a modest decrease from the previous $28.
In other recent news, First Busey Corporation has declared a quarterly cash dividend of $0.24 per share. The company also announced a merger with CrossFirst Bankshares (NASDAQ:CFB), a development that is expected to add $7.6 billion in assets, $6.3 billion in loans, and $6.7 billion in deposits to First Busey's portfolio. Piper Sandler has maintained its Overweight rating on First Busey shares following this merger announcement.
In addition, financial services firm DA Davidson has maintained a neutral stance on First Busey with a revised price target of $24, reflecting recalibrated earnings per share estimates for the years 2024 and 2025. The merger, valued at approximately $916.8 million, is set to enhance First Busey's competitive edge in the banking sector, particularly in wealth management offerings.
The completion of the acquisition is anticipated in the first half of 2025. Once finalized, the combined entity is projected to operate with approximately $20 billion in assets, $15 billion in loans, and $17 billion in deposits. These recent developments illustrate First Busey Corporation's strategic growth and commitment to shareholder value.
InvestingPro Insights
Recent data from InvestingPro provides additional context to First Busey Corporation's (NASDAQ:BUSE) current financial position and market performance. Despite the downgrade from Stephens, BUSE maintains a relatively attractive valuation with a P/E ratio of 12.76, suggesting the stock may still offer value to investors. The company's dividend yield of 3.8% and its impressive track record of maintaining dividend payments for 36 consecutive years, as highlighted by an InvestingPro Tip, may appeal to income-focused investors.
Another InvestingPro Tip notes that analysts predict the company will be profitable this year, which aligns with the Stephens analyst's confidence in First Busey's ability to achieve earnings per share accretion post-acquisition. However, it's worth noting that the company suffers from weak gross profit margins, which could be a factor in the cautious investor sentiment mentioned in the article.
The stock's one-year price total return of 38.21% indicates strong performance over the past year, potentially reflecting the market's previous optimism about the company's prospects. As investors digest the implications of the CrossFirst acquisition, they may want to consider these metrics alongside the analyst's "wait-and-see" approach.
For readers interested in a more comprehensive analysis, InvestingPro offers 6 additional tips for BUSE, providing a deeper understanding of the company's financial health and market position.
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