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Trefis Has A Price Estimate Of $57 For U.S Bancorp's Stock
Trefis price estimate for U.S Bancorp
U.S Bancorp reported revenues of $5.9 billion, up 4% y-o-y. In Q3, Net Interest Margin declined 11 bps sequentially due to the impacts of Fed rate cut, changes in deposit and funding mix, and higher cash balance resulting in a slight drop in net interest income. We expect the Net Interest Margin to remain stressed in the coming months. However, growth in loan assets would partially offset its negative impact on the top line. For the fourth quarter of FY 2019, the consensus estimate for earnings per share is in the range of $1.05 to $1.13 while net revenues are expected to be around $5.8 billion.
Takeaway & Earnings Summary:
U.S Bancorp’s stock has gained more than 33% of its value since the beginning of 2019 with the company’s share price increasing from over $45 in January to around $60 now thanks to the bank's better-than-expected performance in each of the last three quarters.Although the company’s stock price has seen solid growth in 2019 driven by strong quarterly performance, we believe that the company’s stock is overvalued and estimate U.S Bancorp’s valuation to be $57 per share - roughly 5% lower than the current market price.
Q3 2019 Earnings Summary:
In Q3 2019, U.S Bancorp reported Total Revenues of $5.9 billion, up 4% y-o-y. This could be attributed to a 5% y-o-y increase in consumer banking segment coupled with 4% growth in card & payment services and 14% jump in treasury & corporate support, partially offset by 2% y-o-y decrease in wholesale banking.Additionally, the company's adjusted net income margin increased by 85 basis points, rising from 30.04% in Q2 2019 to 30.89% in Q3 2019.For the fourth quarter of FY 2019, the consensus estimate for earnings per share is in the range of $1.05 to $1.13 while net revenues are expected to be around $5.8 billion.
U.S Bancorp Earnings: Performance and 2019 ForecastU.S Bancorp Revenues: How Does U.S Bancorp Make Money?U.S Bancorp Stock (NYSE: USB)More Trefis Financial Industry Data
#1. Estimating U.S Bancorp's Total Revenues:
Total Revenues have increased 12% from $20.1 billion in 2015 to $22.5 billion in 2018, and could grow 2% to $22.9 Billion in 2019
Our Interactive Dashboard Analysis, How Does U.S Bancorp Make Money?, Provides An In Depth View Of The Company's Revenues.
Total Revenue [=A+B+C+D+E]
Treasury & Corporate Support [A]
Consumer Banking [B]
Wealth Management [C]
Card and Payment Services [D]
Wholesale Banking [E]
U.S Bancorp is expected to report $22.9 billion in Total Revenues for 2019, which is 2% more as compared to 2018. This growth would be driven by 3% increase in Consumer Banking revenues followed by a 3% jump in card and payment services, partially offset by 1% drop in wholesale banking segment.This growth in Consumer banking would be driven by increase in Net Interest Income and Mortgage fees
Notably, Wealth Management is expected to grow 1% y-o-y and cross $2.9 billion in 2019.
#2. Deriving U.S. Bancorp's Adjusted Net Income Figure
Adjusted Net Income grew from $5.6 billion in 2015 to $6.8 Billion in 2018, and we expect it to be around $6.9 billion in 2019
Although U.S Bancorp is expected to have a net income of $6.9 billion in 2019 - an increase of 1% on a year-on year basis - net income margin is expected to reduce from 30.1% in 2018 to 29.9% for 2019.This growth in net income would be driven by slight improvement in operating margin and higher revenues, partially offset by a 2% increase in expenses and higher effective tax rate.
Adjusted Net Income [=A*B]
Total Revenue [A]
Net Income Margin [B]
Notably, Adjusted Net Income Increased from $5.6 billion in 2015 to $6.8 Billion in 2018.
#3. Deriving U.S. Bancorp's EPS Figure
The EPS figure has grown 31% over the last 4 years from $3.16 in 2015 to $4.14 in 2018. We expect the trend to continue in 2019 and enable U.S Bancorp to report an EPS of $4.34.
EPS growth from 2018 can be attributed to higher Adjusted Net Income and lower Shares Outstanding.
Adj. Net Income [A]
shares outstanding [B]
U.S. Bancorp has regularly invested in share repurchases to boost shareholder returns. Its share repurchase is likely to touch $2.9 billion for the full year 2019.
#4. Estimating U.S. Bancorp's Share Price
Our Price Estimate of $57 For U.S Bancorp's Stock is based on our Detailed Valuation Model, and implies a 13.1x P/E Multiple on expected 2019 EPS of $4.34
Share Price [=A*B]
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1. How to save your forecasts for U.S. Bancorp:
Click on the blue "Try Trefis" button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
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