By Michael Elkins
J.P. Morgan downgraded Zions Bancorporation (NASDAQ:ZION) to an Underweight rating (from Neutral) and cut the price target on the stock to $46.00 (from $49.00) as analysts see the banking company as being at risk of seeing negative EPS revisions in coming quarters.
They wrote in a note, “While 4Q22 core EPS of $1.88 was above expectations, this was largely tied to net interest income being reported above forecast. On the earnings call, the company’s guidance called for high single digit growth in NII in 2023 with 4Q23 NII to increase slightly as compared to what was reported in 4Q22. In our view, however, we believe it is going to be a stretch for the company to even come close to matching 4Q22 NII in 4Q23, which has implications for 2024 estimates.”
With the guidance that Zions provided on the 4Q22 earnings call, post the quarter J.P. Morgan can add Zions to the group of banks that they see at the higher end of the risk spectrum in terms of potentially missing 2023/2024 consensus estimates.
J.P. Morgan decreased 2023 and 2024 core EPS estimates from $6.61 and $6.47 to $6.21 and $6.07, respectively. They assume a YE23 and YE24 fed funds rate of 4.62% for each year.
Shares of ZION are down 1.82% in pre-market trading on Wednesday.