On Friday, Piper Sandler adjusted its stance on Evans Bancorp (NYSE:NYSE:EVBN), downgrading the stock from Overweight to Neutral. The firm set a new price target for the company at $32.00, shifting from a previous earnings-based evaluation to a tangible book value (TBV) methodology.
The downgrade followed Evans Bancorp's recent financial performance, which included a core earnings miss. This was attributed to various factors, such as increased expenses, reduced fee income, and a slight decrease in net interest income (NII). Despite transactions that improved capital and earnings, the analyst noted that these measures were insufficient to counteract near-term net interest margin (NIM) pressure.
The analyst at Piper Sandler highlighted that the pressure on NIM is expected to continue affecting the profitability of Evans Bancorp over the next year. This ongoing pressure was cited as a reason for the bank's profitability to remain below that of its peers.
The revision in the price target to $32.00 is based on the belief that Evans Bancorp should trade at 100% of its TBV. The anticipated modest upside of 8% to the new price target prompted the firm to alter its rating to Neutral.
InvestingPro Insights
Following the recent downgrade by Piper Sandler, Evans Bancorp (NYSE:EVBN) presents a mixed picture for potential investors, according to data and insights from InvestingPro. The company's market capitalization stands at a modest $162.18 million, with a trailing twelve-month price-to-earnings (P/E) ratio of 7.88, suggesting a potentially undervalued stock compared to industry peers. Despite recent performance concerns, one of the InvestingPro Tips highlights that Evans Bancorp has maintained a commendable track record of raising its dividend for 10 consecutive years and has kept up dividend payments for 23 consecutive years, indicating a level of stability and commitment to shareholder returns.
However, two analysts have revised their earnings expectations downwards for the upcoming period, signaling caution. This aligns with the concerns raised by Piper Sandler regarding the bank's profitability. Moreover, the bank's gross profit margins have been identified as weak, which could be a contributing factor to the pressure on net interest margins that Piper Sandler anticipates will continue over the next year.
On a brighter note, Evans Bancorp has shown a strong return over the last three months, with a 16.42% price total return. Additionally, analysts predict the company will be profitable this year, which may offer some reassurance to investors concerned about the core earnings miss and NIM pressure.
For those seeking a deeper dive into Evans Bancorp's financial health and future prospects, InvestingPro offers additional insights and metrics. Currently, there are 7 more InvestingPro Tips available for Evans Bancorp, which subscribers can access to make more informed investment decisions. With the New Year sale, a subscription to InvestingPro is now available with a discount of up to 50%. Investors can use coupon code "SFY24" to get an additional 10% off a 2-year InvestingPro+ subscription, or "SFY241" to get an additional 10% off a 1-year InvestingPro+ subscription. This offer could be an excellent opportunity for investors to gain access to valuable analytics as they navigate the evolving financial landscape of Evans Bancorp and other investment opportunities.
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