Iberiabank An August Opportunity At KBW

IBERIABANK Corp IBKC seems to have reached an “inflection point” from where there would likely be upward estimate revisions, Keefe, Bruyette & Woods’ Catherine Mealor said in a report. She upgraded the rating on the company from Market Perform to Outperform, while raising the price target from $67 to $72.

Shares At A Discount

Iberiabank’s shares are currently trading at a discount to its Southeast peers as well as to the KRX, despite the company achieving significant improvement in its core earnings power in recent quarters, analyst Mealor commented. She expects the improvement to continue over the rest of the year.

Iberiabank’s stock is the second cheapest among its Southeast Regional Peers, trading lower than even those peers that have higher risk and less geographic diversification.

De-risking Energy Book

Following Iberiabank’s Q2 earnings report, Mealor has reduced the provision expense estimate for 2017 closer to the levels expected in 2H16. The estimate for expenses has been reduced modestly to keep the tangible efficiency ratio at the 60 percent mark.

The EPS estimates for 2016, 2017 and 2018 have been raised from $4.62 to $4.63, from $4.85 to $4.95 and from $5.12 to $5.18, respectively.

“We remain above the Street in the back half of 2016 as we believe strong growth in legacy loans, higher mortgage revenue and efficiency initiatives will continue to drive earnings beats this year. While we are in line with the Street for 2017, our estimates do not assume rate hikes,” the analyst wrote.

Moreover, if Iberiabank were to meet its double-digit EPS growth target, this would lend upside to the estimates. “Importantly we believe the downward trend of EPS revisions is now over as we believe the impact of rates is mostly out of consensus estimates for next year,” Mealor added.

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