On Wednesday, Keefe, Bruyette & Woods adjusted its outlook on Enterprise Financial Services (NASDAQ:EFSC), reducing the stock price target to $49 from $51, while maintaining an Outperform rating on the company's stock.
The adjustment follows Enterprise Financial's recent earnings report, which revealed operating earnings of $1.07 per share, falling short of analyst expectations. The miss was attributed to weaker pre-provision net revenue (PPNR) and a slightly higher provision for credit losses.
The financial services firm experienced greater than anticipated net interest margin (NIM) compression of 10 basis points quarter over quarter, compared to the forecasted 5 basis points. This pressure on NIM, alongside a modestly smaller earning asset base, contributed to weaker spread income. Moreover, lower tax credit income impacted fee income, although expenses saw some benefit from reduced specialty deposit costs.
Despite these challenges, Enterprise Financial demonstrated favorable loan growth at 5% on a last quarter annualized basis (LQA). The company's robust loan pipelines are expected to sustain mid-single digit growth throughout the current year.
Nonetheless, the continued margin drift and a revised fee income outlook, partially mitigated by improved expenses, prompted the firm to revise its earnings estimates for 2024 and 2025 downward by 3% and 4%, respectively.
The report by Keefe, Bruyette & Woods concluded with a reaffirmation of the Outperform rating for Enterprise Financial Services, despite the lowered stock price target to $49. The revised target reflects the firm's updated expectations based on the recent financial performance and near-term projections for the company.
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