Keefe Bruyette cuts HomeStreet shares target amid Q124 earnings miss By Investing.com

On Tuesday, Keefe, Bruyette & Woods revised its price target for HomeStreet (NASDAQ:) shares, reducing it to $13.50 from the previous $15.50. Despite the reduction, the firm maintained its Market Perform rating on the stock.

The adjustment follows HomeStreet’s first-quarter earnings for 2024, which did not meet the expectations set by Keefe, Bruyette & Woods and the consensus. The shortfall was attributed to ongoing net interest margin (NIM) compression, elevated seasonal expenses, and a decrease in fee revenue.

In conjunction with the earnings report, HomeStreet and FirstSun Capital Bancorp (NASDAQ:) (FSUN) disclosed modifications to their merger agreement. A key change is the updated exchange ratio, now set at 0.3867x, which equates to a takeout price of $13.53 per share.

These amendments are expected to make the transaction over 24% accretive to FirstSun’s earnings per share (EPS) in 2025, with a 13.5% dilution in tangible book value (TBV). The earn-back period is projected to be 2.8 years, and the merger is anticipated to be finalized towards the end of 2024.

Following the announced amendments and a reassessment of the deal’s financial impact, Keefe, Bruyette & Woods has also updated its EPS estimates for HomeStreet. The firm now forecasts a loss of $(1.07) per share in 2024 and a profit of $0.50 per share in 2025. The revised price target of $13.50 is directly tied to the new exchange ratio detailed in the merger agreement amendments.

The merger between HomeStreet and FirstSun is a significant development for both entities, with the potential to enhance future earnings while also presenting near-term financial dilution. The market’s reaction to the adjusted price target and the maintained Market Perform rating will be seen as trading continues on the NASDAQ.

InvestingPro Insights

As HomeStreet navigates through its merger with FirstSun Capital Bancorp and deals with recent earnings that fell short of expectations, real-time data from InvestingPro provides a more granular look at the company’s financial health and stock performance. The adjusted market capitalization of HomeStreet stands at $201.59 million, reflecting the scale of the company within the financial sector. Despite the challenges, the stock’s Price / Book multiple, as of the last twelve months leading into Q1 2024, is at a low of 0.38, indicating that the stock may be undervalued relative to the company’s book value.

InvestingPro Tips suggest that HomeStreet’s stock is currently in oversold territory according to the RSI, which could hint at a potential rebound. However, it’s important to note that analysts have revised their earnings expectations downwards for the upcoming period, which may impact investor sentiment. For those looking to explore further, there are over 10 additional InvestingPro Tips available for HomeStreet, which could provide deeper insights into the stock’s future movements.

Investors interested in a comprehensive analysis of HomeStreet’s prospects might consider the InvestingPro platform, where they can use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription. This could be an opportune time to leverage these insights, especially in light of the recent price target adjustment by Keefe, Bruyette & Woods and the ongoing merger developments.

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