On Thursday, DA Davidson maintained a Neutral rating on Fulton Financial (NASDAQ: NASDAQ:FULT) stock, with a consistent price target of $20.00. The firm's analysis highlighted Fulton Financial's pre-provision net revenue (PPNR) outperformance, driven by a stronger net interest income (NII) and core fees, although this was somewhat counterbalanced by increased operating expenses.
The company reported a better-than-anticipated net interest margin (NIM), which rose by 6 basis points quarter over quarter, and a robust deposit growth at 9%.
The update also included insights into the FultonFirst initiative, which is expected to keep the year-over-year operating expenses flat for the 2025 estimate. This initiative, alongside the reported financial results, contributed to a 2% rise in the company's share price amidst a generally positive market trend.
The guidance for 2024 remained unchanged, suggesting a lower NII for the fourth quarter of 2024 as anticipated, but the firm noted that the path to NII is favorable due to already declining deposit costs.
DA Davidson revised its earnings per share (EPS) estimates for Fulton Financial downward, taking into account the weaker operating expenses and NII. However, the firm also identified potential upside from faster declines in deposit costs and any near-term revenue benefits that may arise from the FultonFirst strategy.
Despite these factors, the reiteration of the Neutral rating was influenced by a return profile that is below peer average, with an estimated 1.5% PPNR return on assets (ROA) for 2025, and limited potential for stock price growth relative to the price target.
In other recent news, Fulton Financial Corporation reported record operating earnings of $0.50 per diluted share for the third quarter of 2024, with a substantial increase in operating net income to $91.3 million. This robust performance was largely driven by notable loan and deposit growth, especially following the integration of Republic Bank.
Total deposits saw an increase of $745 million, marking a 12% annualized growth, while net interest income rose by $16 million to reach $258 million. Additionally, the company's Wealth Management revenues reached a record $21.6 million.
The company also projected annual recurring savings of over $50 million by 2026, largely attributed to the integration of Republic Bank. Fulton Financial anticipates achieving 40% cost-savings from this acquisition by January 2025. It also projects net interest income for 2024 to be between $925 million and $950 million, and non-interest income to be between $240 million and $260 million.
On the downside, the cost of total deposits rose by 10 basis points to 2.24%, and the company anticipates a municipal deposit runoff of about $300 million in the fourth quarter. Despite these challenges, Fulton Financial remains optimistic about its financial future, with a focus on integrating the Republic acquisition and progressing with the Fulton First initiative.
InvestingPro Insights
Fulton Financial's recent performance and future outlook can be further illuminated by data from InvestingPro. The company's P/E ratio of 11.55 suggests a relatively modest valuation compared to industry peers. This aligns with DA Davidson's Neutral rating and the potential limited upside in stock price growth.
InvestingPro Tips highlight that Fulton Financial has maintained dividend payments for 43 consecutive years, demonstrating a strong commitment to shareholder returns. This is particularly relevant given the company's current dividend yield of 3.64%, which may appeal to income-focused investors in the current market environment.
Additionally, Fulton Financial has shown a high return over the last year, with a 1-year price total return of 54.31%. This impressive performance is consistent with the company's PPNR outperformance noted in the DA Davidson analysis.
For investors seeking a deeper understanding of Fulton Financial's prospects, InvestingPro offers 5 additional tips that could provide valuable insights into the company's financial health and market position.
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