RBC raises price target on Provident Financial shares

On Monday, RBC Capital Markets adjusted its outlook on Provident Financial Services (NYSE:), increasing the stock’s price target to $21 from $18 while maintaining an Outperform rating. The revision follows the company’s second-quarter results, which included the impacts of its merger with Lakeland. The company exhibited robust margin expansion, controlled expenses, and strong credit quality.

The bank’s recent performance, as reported, benefited from the integration with Lakeland, and the analyst anticipates further margin growth in the near term. Additionally, improvements in balance sheet growth and the full realization of cost synergies from the merger are expected by the end of 2024. The analyst’s comments underscore Provident’s solid core fundamentals and the positive impact of the merger on its financials.

Provident Financial Services’ outlook remains favorable, with predictions of continued margin expansion. The bank is also poised for improved balance sheet growth, and the analyst expects the realization of merger-related cost synergies by the end of 2024. These factors contribute to the bank’s projection of sustained growth and performance.

The analyst from RBC Capital Markets views Provident as a high-quality growth franchise. The bank’s steady growth trajectory is anticipated to benefit from the synergies obtained through the Lakeland merger over time. This long-term perspective is a key factor in the analyst’s positive rating.

The price target increase to $21 reflects a fine-tuning of estimates based on the bank’s recent performance and forward-looking statements. Provident Financial Services’ strong quarter and promising outlook support the analyst’s decision to maintain an Outperform rating and raise the price target.

In other recent news, Provident Financial Services has reported robust first-quarter earnings of $0.43 per share. The company is also nearing the completion of its strategic merger with Lakeland Bancorp (NASDAQ:), following necessary regulatory approvals. This merger is expected to positively impact Provident Financial’s net interest margin, return on assets, and return on tangible equity by 2025.

Piper Sandler, a reputable financial analysis firm, has maintained its Overweight rating on Provident Financial shares, showing confidence in the company’s future performance.

This endorsement followed a series of investor Zoom (NASDAQ:) calls, during which Provident Financial’s management expressed optimism about the merger with Lakeland Bancorp. They highlighted the meticulous integration planning that took place over a 17-month period, which is expected to ensure a smooth transition.

The company anticipates exceeding initially estimated cost savings from the merger, and deal charges are also expected to be lower than initially forecasted. Provident Financial Services is set to complete the systems conversion by Labor Day weekend and plans to consolidate 22 branch locations by the end of August.

Management also emphasized the importance of cultural integration within the newly merged entity, a process led by the CEO, to ensure alignment with the company’s values and goals. Lastly, despite $83 million in net outflows by the end of the quarter, Provident Financial’s fee-based businesses, particularly insurance and wealth management, have demonstrated strong performance.

InvestingPro Insights

Provident Financial Services (NYSE:PFS) has recently caught the attention of RBC Capital Markets, and the InvestingPro platform offers additional insights that may be of interest to investors. With a market capitalization of $2.47 billion and a P/E ratio of 20.52, the company is trading at a high earnings multiple, which is a key point for investors to consider. The P/E ratio has been adjusted to 25.8 for the last twelve months as of Q2 2024, indicating a valuation perspective that may warrant attention.

While the company’s gross profit margins have been identified as weak, Provident Financial Services has a commendable track record of maintaining dividend payments for 22 consecutive years, boasting a dividend yield of 5.05% as of the ex-date of the last dividend on April 26, 2024. This level of shareholder return, coupled with a strong price total return of 32.47% over the last month and 27.5% over the last three months, highlights the stock’s recent performance momentum.

Investors seeking a comprehensive set of insights and analysis on Provident Financial Services can explore additional InvestingPro Tips that delve deeper into the company’s financial health and market performance. There are 9 additional tips available on the InvestingPro platform, which can be accessed at https://www.investing.com/pro/PFS. For those interested in a subscription, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.

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