Keefe upgrades CVB Financial stock, sees NII stabilization as key growth driver By Investing.com

On Wednesday, CVB Financial Corp (NASDAQ:CVBF) received an upgrade in its stock rating from Keefe, Bruyette & Woods. The firm changed its rating from Market Perform to Outperform and increased the price target to $22 from the previous $20. This adjustment comes after a notable decline in the company’s stock performance since the beginning of the year.

CVB Financial’s shares have experienced a significant drop, falling by 31% since the start of 2023. This decline contrasts with a mere 1% dip for the KRX, positioning CVBF as the second-worst performer in the index, only surpassed by NYCB.

The downgrade in performance was attributed to several factors, including a high percentage of non-interest bearing deposits and greater pressure on net interest income during a period of rate tightening.

Despite these challenges, the analyst from Keefe, Bruyette & Woods anticipates a positive shift. The expectation is that the net interest margin and deposits should be reaching a point of stabilization at this stage in the economic cycle. Additionally, there is a forecast for an improvement in net interest income per share as CVB Financial takes steps to de-leverage its balance sheet.

The firm’s analyst suggests that with the anticipated upswing in net interest income per share in the upcoming quarters and the stock trading in line with the KRX based on 2025 and 2026 estimates, CVB Financial presents an attractive investment opportunity.

The analyst’s outlook indicates a belief in the strength and potential of CVB Financial as a high-quality franchise, leading to the upgrade to an Outperform rating.

In other recent news, CVB Financial Corp. has announced a quarterly cash dividend of $0.20 per share for the third quarter of 2024, maintaining its streak of consecutive payouts. This marks the 140th successive quarterly cash dividend, demonstrating the company’s commitment to consistent shareholder returns. In addition to this, CVB Financial reported steady earnings for the second quarter, with net earnings of $50 million, or $0.36 per share.

Financial services firm Stephens has upgraded the price target for CVB Financial shares from $19 to $21, while maintaining an Equal Weight rating. The adjustment followed CVB Financial’s second-quarter results, which exceeded both Stephens’ estimate and the consensus estimate. The firm also highlighted the potential for margin improvement in the second half of 2024 and into 2025, driven by strategic securities repositioning.

In other developments, CVB Financial is cautiously optimistic about potential merger and acquisition opportunities that could emerge in the second half of the year. Despite a slight decrease in total loans and a declining net interest margin, CVB remains optimistic about its growth potential, particularly in the C&I loans pipeline. These recent developments underline CVB Financial’s proactive approach in navigating the financial landscape.

InvestingPro Insights

Recent data from InvestingPro adds context to CVB Financial’s current position and outlook. Despite the stock’s year-to-date decline of 9.92%, the company maintains a solid financial foundation. With a P/E ratio of 11.85 and a price-to-book ratio of 1.15, CVBF appears to be trading at relatively modest valuations compared to historical norms.

InvestingPro Tips highlight both challenges and strengths for CVB Financial. While six analysts have revised their earnings downwards for the upcoming period, suggesting near-term headwinds, the company has maintained dividend payments for an impressive 36 consecutive years. This consistent dividend history underscores the company’s financial stability, which aligns with the analyst’s view of CVBF as a high-quality franchise.

The company’s dividend yield stands at a robust 4.6%, potentially offering an attractive income opportunity for investors. However, it’s worth noting that net income is expected to drop this year, which could explain the recent stock price weakness and analyst downgrades.

For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights, with 5 more tips available for CVB Financial on the platform.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.