On Tuesday, Keefe, Bruyette & Woods, a financial services company, updated its price target on Berkshire Hills Bancorp (NYSE:BHLB) shares. The new target is set at $34.50, an increase from the previous $32.00, while the firm continues to hold a Market Perform rating on the stock.
The adjustment follows the recent merger-of-equals announcement between Berkshire Hills Bancorp and Brookline Bancorp (NASDAQ:BRKL). The analyst from Keefe, Bruyette & Woods has revised the stand-alone earnings per share (EPS) estimates for Berkshire Hills to $2.16 and $2.72. This revision accounts for the anticipated $100 million common equity raise and excludes forward share repurchases that were previously included in their model.
The analyst expressed a positive view on the long-term profitability impact of the merger. However, they noted that the re-rating of the stock's valuation is expected to be gradual. This is in line with the performance trends observed in other similar mergers, where stocks often underperform relative to peers in the period from the announcement to the closure of the deal. For deeper insights into BHLB's valuation and growth prospects, investors can access the comprehensive Pro Research Report, along with 7 additional ProTips available on InvestingPro.
This underperformance is attributed to investors pricing in execution risks, which may result in the stock price being more range-bound in the coming quarters leading up to the deal's finalization.
The revised price target of $34.50 corresponds to 1.6 times the forward pro forma tangible book value (TBV) and 9.1 times the projected pro forma 2026 earnings. Despite the potential for increased profitability post-merger, the analyst has chosen to maintain the Market Perform rating, suggesting a neutral outlook on the stock's near-term performance. Based on InvestingPro's Fair Value analysis, the stock currently appears to be trading above its intrinsic value.
In other recent news, Berkshire Hills Bancorp has made significant strides, issuing $100 million in a private stock sale and announcing a merger with Brookline Bancorp. The merger, valued at approximately $1.1 billion, is expected to close in the third quarter of 2025, resulting in a combined entity with proforma assets amounting to $24 billion. Following this merger announcement, analysts from RBC Capital Markets and Seaport Global Securities revised their projections for Berkshire Hills Bancorp's earnings per share (EPS) for the years 2024, 2025, and 2026.
RBC Capital Markets also adjusted its price target for the company, while Seaport Global Securities upgraded the company's stock from Neutral to Buy. Berkshire Hills Bancorp reported strong financial results in the third quarter of 2024, with operating earnings of $24.8 million and projected the net interest margin (NIM) to be between 3.10% and 3.20% in Q4 2024.
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