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DA Davidson analyst Manuel Navas initiated coverage on Burke & Herbert Financial Services (NASDAQ:BHRB) with a Buy rating and price forecast of $76.
According to the analyst, the “hidden gem” is characterized by its “underappreciated” earnings potential and a lack of attention, leading to an appealing valuation that should benefit DMV footprint.
Navas notes that EPS growth is expected to be strong throughout the forecast period, with return expectations exceeding peers.
The projected 1.45% ROA and 16.5% ROTCE for 2025 should enhance the valuation, indicating a potential upside.
The analyst forecasts the company will achieve above-peer loan growth of 8% in 2025, with strong mid-single-digit growth expected over the long term.
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The analyst notes that pipelines are robust due to competitors pulling back, with long-term growth expected in the mid-single digits (4%-6%). Navas projects 2% annualized loan growth in the second half of 2024, and 8% growth in 2025, aligning with the company’s conservative target of 8%-10%.
The analyst highlights that there are considerable repricing opportunities on the funding side, which will support the core net interest margin (NIM) amid rate cuts.
This includes $400 million in brokered CDs at over 5% and around $1 billion in a T-fund deposit product expected to reprice quickly. With an anticipated 50 basis points more in Fed rate cuts this year, totaling a -100 basis point impact for both 2024 and 2025, the projected reported NIM for 2024 and 2025 is 3.92% and 4.17%, respectively, along with an expanding core NIM.
Price Action: BHRB shares are trading higher by 4.3% to $63.73 at last check Wednesday.
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Posted In: BHRB
