On Friday, Keefe, Bruyette & Woods adjusted its price target for Brookline Bancorp (NASDAQ:BRKL), reducing it to $10.50 from the previous $12.00. The firm has kept its Market Perform rating on the stock. This move came as a response to Brookline Bancorp's shares dropping by 11.7% today, which was attributed to weaker core pre-provision net revenue (PPNR) due to a 7 basis points net interest margin (NIM) miss and increased credit costs, although these were not related to office expenses.
The firm has revised its earnings estimates downwards for Brookline Bancorp, citing a less favorable NIM trajectory and higher credit costs. The 2024 earnings estimate has been decreased by 17% to $0.79, and the 2025 forecast has been reduced by 12% to $0.99. Despite these adjustments, the NIM is expected to bottom out in the second quarter and expand subsequently, with the return on tangible common equity (ROTCE) projected to recover to above 10% by the fourth quarter of 2025.
The near-term investor sentiment is anticipated to hinge on the NIM reaching its lowest point in the second quarter and the level of credit costs over the next few quarters. However, the firm expects the stock to gradually move back up towards its tangible book value (TBV), assuming the absence of significant setbacks. The new price target of $10.50 reflects a valuation of 1.0 times forward tangible book value and 10.6 times projected 2025 earnings.
InvestingPro Insights
Recent data from InvestingPro shows that Brookline Bancorp (NASDAQ:BRKL) has a market capitalization of $738.68M and a P/E ratio that stands at 9.06, indicating a potentially undervalued stock compared to historical earnings. Notably, the P/E ratio based on the last twelve months as of Q1 2024 is slightly lower at 8.96. Despite recent price declines, with a 1-week total return of -10.23% and a 3-month total return of -24.05%, Brookline Bancorp boasts a robust dividend yield of 6.41%, reflecting a commitment to shareholder returns. This is complemented by the fact that the company has consistently paid dividends for 27 years and has increased its dividend for the last six years.
InvestingPro Tips highlight that analysts remain optimistic about the company's profitability in the near term. Furthermore, the substantial dividend offered to shareholders stands out as a key factor, especially in the current climate where investors are seeking income-generating assets. For investors looking for more in-depth analysis and additional tips, there are 7 more InvestingPro Tips available, which can be accessed with an exclusive offer: use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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