On Thursday, Wells Fargo analysts adjusted their outlook on U.S. Bancorp (NYSE:USB) shares, reducing the price target from $56.00 to $50.00 while maintaining an Overweight rating. Currently trading at $37.82, with a P/E ratio of 10.8x, InvestingPro analysis suggests the stock is undervalued. The revision follows the company’s first-quarter performance in 2025, which aligned with expectations due to improved costs, credit, and capital.
U.S. Bancorp’s guidance for 2025 remained unchanged, with revenue growth projected at 3%-5%. Wells Fargo highlighted the challenge for the bank to sustain growth while keeping costs flat. The bank maintains a strong dividend track record, having raised dividends for 14 consecutive years, with a current yield of 5.29%. Nonetheless, the analysts noted several positive factors, including what they referred to as "the 3 C’s" – costs, credit, and capital. Operational leverage showed an improvement to 270 basis points in the first quarter of 2025, with U.S. Bancorp reaffirming a 200 basis point guidance for the full year.
Credit conditions for U.S. Bancorp have improved, with nonperforming assets (NPAs) decreasing by 6% and net charge-offs (NCOs) down by 1 basis point. However, the reserve release was larger than anticipated. The bank’s net interest income (NII) and expenses did not meet Wells Fargo’s estimates, with NII being slightly lower and expenses a bit higher than expected.
Following the first-quarter results, Wells Fargo has increased its earnings per share (EPS) estimate for 2025 by $0.05 to $4.25. However, the estimates for 2026 and 2027 remain unchanged at $4.60 and $4.95, respectively. The new price target of $50.00 is based on approximately 11 times Wells Fargo’s estimated earnings for 2026, taking into account the heightened macroeconomic uncertainty.
In other recent news, U.S. Bancorp reported its first-quarter 2025 earnings, showcasing an earnings per share (EPS) of $1.30, which exceeded the forecasted $0.98. The company’s revenue also surpassed expectations, reaching $6.96 billion compared to the anticipated $6.91 billion. Despite this positive earnings surprise, the stock experienced a slight decline in pre-market trading. Raymond James adjusted its outlook on U.S. Bancorp, lowering the price target to $51.00 from $57.00 but maintained an Outperform rating, highlighting the bank’s strong operating leverage and strategic direction. Meanwhile, JPMorgan analysts maintained an Underweight rating with a $43.50 price target, noting issues such as fluctuations in Mortgage Servicing Rights and potential challenges in auto loan securitizations. The analysts also recognized U.S. Bancorp’s effective management in growing capital markets fees. Additionally, U.S. Bancorp launched a new product, BankSmartly, targeting affluent customers and projected a full-year revenue growth target of 3-5%. The company remains focused on maintaining positive operating leverage and expects modest loan growth in the near future.
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