Keefe, Bruyette & Woods: Umpqua A 'Holiday Opportunity,' Valuation Compelling

Jacquelynne Chimera of Keefe, Bruyette & Woods reiterated a Market Perform rating on

on Friday with a $19 price target. “We believe the current valuation discount presents an attractive entry point into a franchise that we expect to post higher profitability metrics than its peer median in 2015,” Chimera wrote. The analyst adds that shares are trading at a 13.3x 2015 earnings per share valuation, presenting a “compelling case.” Chimera adds that Umpqua Holdings' acquisition of Sterling Financial provides additional opportunities for cost savings and revenue enhancements. The analyst said that this benefit will be seen in future quarters and are “already well underway.” Chimera notes that accretable yield contributes 16 percent and 13 percent to the 2015 and 2016 earnings per share estimates of $1.30 and $1.40, respectively. The analyst does state that the income stream impacts the current valuation discount which is “excessive.” However, Chimera does state “we would like to see a bit more upside to our target before upgrading shares, given the dependency of our forward estimates on accretable yield.”