Piper Sandler Updates Target on Great Southern Bancorp
Piper Sandler has revised its outlook for Great Southern Bancorp (NASDAQ: GSBC), reducing the price target from $64 to $62 while maintaining a Neutral rating for the stock. This adjustment follows a thorough assessment of the company’s recent quarterly performance and updates to its financial forecasting model.
According to the firm's analytical insights, various factors contributed to this shift, including a promising outlook for profit margins, an uptick in loan growth, and decreased operational costs. However, it is worth noting that Piper Sandler has opted to exclude share repurchases from its forecasts for the near future. This decision arises from an expectation that the bank under review will prioritize maintaining sufficient capital and liquidity, especially considering an impending call date and upcoming repricing of its $75 million subordinated debt, which is set for the following year.
Increased EPS Estimates
In line with these adjustments, Piper Sandler has raised its earnings per share (EPS) estimates for Great Southern Bancorp for 2024 and 2025. The adjustments reflect an increase of $0.23 and $0.40, leading to projected EPS figures of $5.33 for 2024 and $5.35 for 2025. Moreover, a new EPS estimate for 2026 has been introduced, set at $6.00. This forecast is based on expectations of gradual margin expansion, mid-single-digit loan growth, slight operating leverage, and strong credit quality continuing to characterize the company.
Price Target Context
Despite the enhancements seen in the earnings projections, the overall price target has been adjusted downward due to observed declines in multiples across Midwestern banks. The revised target reflects a multiple of 11.6 times the firm's 2025 EPS estimate, decreasing from the previous rate of 12.9 times. This cautious approach underscores Piper Sandler's updated perspective on the financial trajectory of Great Southern Bancorp.
Q3 2024 Performance Review
Turning to the bank's third-quarter performance, Great Southern Bank experienced notable achievements, reporting earnings of $1.41 per diluted share, with a net income of $16.5 million. This marks an increase compared to the $1.33 per share earnings recorded in the same quarter of the previous year, showcasing resilience amid challenging economic conditions. The bank has successfully surpassed the $6 billion asset mark, with net interest income also rising by 2.6% to reach $48 million. Additionally, a quarterly dividend payment of $0.40 per share was declared, reflecting the company's commitment to stakeholder returns.
Credit Quality and Management Focus
On the credit risk management front, Great Southern Bank is reporting a decrease in nonperforming assets, now standing at a mere 0.13% of total assets. However, non-interest income experienced a dip of $860,000 when compared to Q3 2023, influenced largely by reductions in overdraft fees and debit card income. Conversely, gains from loan sales saw a positive bump, with an increase of $292,000.
The current management strategy prioritizes controlling costs while navigating a particularly competitive deposit landscape. They anticipate that the effective tax rate will stabilize in the range of 18.0% to 20.0% moving forward.
Valuation Insights and Dividend History
Additional insights shed light on Great Southern Bancorp's valuation, particularly with a P/E ratio calculated at 11.49, which aligns closely with Piper Sandler's price target valuation methodology. This metric signifies that the bank's stock is trading at a sound relative position concerning its earnings.
Notably, Great Southern Bancorp has established a robust reputation by maintaining uninterrupted dividend payments for 35 consecutive years. This consistent track record of dividend distribution is likely to attract income-focused investors, especially given the attractive current dividend yield of 2.76%.
Despite these strengths, it's essential to acknowledge that the company has encountered negative revenue growth, witnessing a -7.43% contraction in revenue over the past twelve months as of Q3 2024. This performance aligns with Piper Sandler's emphasis on loan growth and margin expectations.
Frequently Asked Questions
What has Piper Sandler adjusted for Great Southern Bancorp?
Piper Sandler has reduced its price target for Great Southern Bancorp to $62 from $64 while maintaining a Neutral rating.
What are the new earnings estimates for Great Southern Bancorp?
The revised EPS estimates are $5.33 for 2024, $5.35 for 2025, and a new estimate of $6.00 for 2026.
How did Great Southern Bank perform in Q3 2024?
Great Southern Bank reported earnings of $1.41 per diluted share and net income of $16.5 million, showing growth compared to the previous year.
Is Great Southern Bancorp a good choice for income-focused investors?
Yes, with its 35 consecutive years of dividends and a current yield of 2.76%, it appeals to income-focused investors.
How does the company's P/E ratio compare in its sector?
The company's P/E ratio stands at 11.49, indicating that it is trading reasonably relative to its earnings within its sector.
