On Monday, BofA Securities has raised its outlook on Huntington Bancshares (NASDAQ:HBAN) stock, upgrading from Neutral to Buy and increasing the price target to $16 from $14. The firm's analyst cited a variety of factors for the positive shift, including the bank's strong positioning to deal with various macro-economic scenarios and its potential for revenue growth acceleration into 2025.
The upgrade reflects the analyst's expectation of a roughly 10% increase in earnings per share (EPS) and an 18% potential upside for the stock. The revised forecast for fiscal years 2024, 2025, and 2026 EPS are $1.20, $1.44, and $1.55 respectively, indicating increases of 4%, 15%, and 14%. These adjustments are primarily driven by anticipated higher net interest income (NII).
The new price objective of $16 is based on positive EPS revisions and higher assigned multiples, with a 2024 estimated price to tangible book value (P/TBV) of 1.7 times, up from the prior 1.5 times. This change is attributed to the bank's stronger growth and return on equity (ROE) outlooks.
At the time of the upgrade, Huntington Bancshares' stock was trading at 9.4 times the 2025 price-to-earnings (P/E) ratio, which is in line with its historical average of 12.5 times and comparable to its peers. In terms of price to tangible book value, the stock is at 1.5 times year-end 2024 estimated tangible book value, with a forecasted return on tangible common equity (ROTCE) of approximately 15%. Additionally, the bank offers a dividend yield of 4.6% with a 55% EPS payout ratio.
The upgrade by BofA Securities indicates a belief in Huntington Bancshares' ability to leverage its franchise investments and footprint for solid execution, which is expected to contribute to an acceleration in revenue growth leading into the year 2025.
InvestingPro Insights
BofA Securities' recent upgrade of Huntington Bancshares is echoed by certain data points and InvestingPro Tips that highlight the bank's financial status and market position. With a market capitalization of $19.7 billion and a price-to-earnings (P/E) ratio of 10.76, Huntington Bancshares is trading close to its fair value, as estimated by InvestingPro at $13.12. The bank's consistency is underscored by its dividend track record, having maintained payments for 54 consecutive years, which may appeal to income-focused investors. Additionally, the company's stock price is nearing its 52-week high, reflecting a significant price uptick of 37.62% over the last six months, signaling strong investor confidence.
While analysts have revised earnings downwards for the upcoming period, which aligns with the slight negative revenue growth of -0.16% over the last twelve months, the bank is expected to remain profitable this year, as reflected in the forecasted EPS increases for the coming years. These projections are supported by the bank's robust operating income margin of 39.4% and a dividend yield of 4.56%, which is attractive in the current interest rate environment.
Investors considering Huntington Bancshares may find additional insights by exploring the full range of InvestingPro Tips, which include 7 more tips for a comprehensive analysis. For those looking to delve deeper into the bank's financials and market potential, using the coupon code PRONEWS24 can secure an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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