On Monday, Piper Sandler adjusted the outlook for First Mid-Illinois Bancshares (NASDAQ:FMBH) stock, reducing it to $38 from $39, while maintaining an Overweight rating. The firm's decision follows the announcement of the bank's first-quarter results, which showcased a 4% positive pre-provision net revenue (PPNR) surprise, bolstered by stronger net interest income (NII) growth and continued control over operating expenses.
First Mid-Illinois Bancshares reported a robust performance in the first quarter, driven by significant NII growth and efficient expense management. The bank's Overweight rating was reaffirmed based on expectations of further multiple expansion relative to its peers, owing to its superior operating leverage prospects.
The bank is likely to experience above-average NII growth, maintain ongoing tight cost controls, and see stronger fee income increases compared to most peers due to its highly relationship-based and holistic business model.
The bank's excess capital flexibility is also positioned to support additional mergers and acquisitions (M&A) activities. These are anticipated to be well-received, guided by the proactive approach of the bank's Chairman, President, and CEO Joe Dively. The M&A strategy is part of the rationale for the positive outlook on the bank's stock.
Piper Sandler has updated its earnings per share (EPS) estimates for First Mid-Illinois Bancshares for the years 2024 and 2025 to $3.35 and $3.30, respectively. This represents a slight increase for 2024 by 1% and a decrease for 2025 by 3%, reflecting the first-quarter performance and a more conservative outlook on NII.
Despite the decrease in the price target, the new target of $38 is still set at a premium to peers, based on 11.5 times the firm's 2025 earnings estimate. This premium is justified by the bank's aforementioned catalysts, which are expected to drive the bank's performance and stock valuation in the coming years.
InvestingPro Insights
As First Mid-Illinois Bancshares (NASDAQ:FMBH) navigates through market conditions, real-time data from InvestingPro provides a clearer picture of its financial health and future prospects. With a market capitalization of $752.74 million and a strong revenue growth of 11.19% over the last twelve months as of Q1 2024, FMBH demonstrates a solid financial trajectory. The bank's price-to-earnings (P/E) ratio stands at a reasonable 10.71, indicating potential value for investors seeking earnings stability.
Two InvestingPro Tips highlight the bank's commitment to shareholder returns: FMBH has raised its dividend for 13 consecutive years and maintained dividend payments for 25 consecutive years, showcasing a reliable dividend policy. Additionally, the bank has been profitable over the last twelve months, which aligns with analysts' predictions that the company will remain profitable this year.
Investors looking for deeper insights can explore additional tips on InvestingPro, where there are currently 3 more tips available for FMBH. Utilize the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription. This offer could be especially valuable for those keen on understanding the nuances of FMBH's financial position and future potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.