Sell Off In Peoples Bancorp Looks 'Exaggerated'

• Peoples Bancorp Inc. PEBO shares have lost 9 percent since January 4, and are trading near their 52-week low of $16.34.
• Boenning & Scattergood’s Scott Beury upgraded the rating for the company to Outperform, with a price target of $22.50.
• The recent sell-off in Peoples Bancorp’s shares appears to be too steep in view of the potential relative improvement in its performance in 2016, Beury mentioned.

Analyst Scott Beury mentioned that Peoples Bancorp had grown by following a strategy of acquisitive growth and product differentiation. He added that while the company’s willingness to enter new markets and bolster existing ones is attractive, it may not be able to show superior return metrics and accelerated growth necessary for a premium valuation.

“Though we believe the series of noisy quarters in 2015 signals that Peoples is still in the process of migrating towards normalized performance, we believe the recent sell-off of the shares is overstated based on the company’s potential for relative improvement in 2016,” Beury wrote.

The analyst expects some discount in the company’s stock valuation on account of the company’s inconsistent performance and lumpy credit quality. He added, however, that the current discount in Peoples Bancorp’s shares appears to be “too steep.”

Peoples Bancorp reported its 4Q15 operating EPS at $0.18 and GAAP EPS at $0.14. The company’s loan portfolio is being negatively impacted by a “few chunky credits.” The operating EPS estimates for 2016 and 2017 have been reduced from $1.58 to $1.50 and from $1.68 to $1.62, respectively, to reflect higher credit costs.