Where Is U.S. Bancorp Stock Headed?

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US Bancorp stock (NYSE:USB) has lost about 27% YTD, compared to a 21% drop in the S&P500 index over the same period. In addition, at its current price of $41 per share, it is trading 30% below its fair value of $59 — according to estimates by Trefis. US Bancorp’s Valuation, The bank exceeded consensus estimates in the second quarter of 2022, with revenue growing 4% year over year to $5.98 billion (excluding taxable-equivalent adjustments). This was driven by 7% growth in both the Payment Services and Corporate and Commercial Banking units, followed by 26% growth in the Wealth Management and Investment Services division. The classes benefited from an increase in net interest income due to higher average loans and improved interest rates. In addition, corporate payment products, merchant processing services and trust and investment management fees increased in the quarter. On the other hand, the consumer banking division reported a decrease of 7% due to lower nontax revenue. On the cost front, provisions for credit losses increased from $170 million to $311 million, coupled with higher expenses as a % of revenue, resulting in a 24% decline in adjusted net income to $1.46 billion.

The bank’s total revenue grew 3% annually to $11.6 billion in the first half of 2022. This was primarily due to a 7% increase in net interest income driven by improving interest rates and higher outstanding loan balances. However, this was partially offset by a slight decrease in non-interest income. In addition, the first two quarters saw an unfavorable growth in provisions for non-interest spending and credit deficit. This resulted in a 28% decline in adjusted net income to $2.9 billion.

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The Federal Reserve has raised benchmark interest rates five times to manage record-high inflation levels. This has benefited the net interest margin of lenders like US Bancorp.
TBBK
, We expect the same trend to continue in the subsequent quarters as well. Notably, consensus estimates for Q3 revenue and earnings are $6.24 billion and $1.17, respectively. Altogether, US Bancorp’s Revenue It is projected to touch $24.6 billion in FY 2022. Additionally, USB’s adjusted net income margin is expected to normalize to approximately 26%, leading to adjusted net income of $6.4 billion. This would lead to a valuation of $59 with an annualized EPS of $4.30 and a P/E multiplier of just below 14x.

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Credit: www.forbes.com /

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