On Monday, DA Davidson increased the price target for United Bankshares Inc. (NASDAQ: NASDAQ:UBSI) to $36.00, up from the previous $35.00, while maintaining a Neutral rating on the stock. The adjustment follows United Bankshares' announcement of its acquisition of Piedmont Bancorp in Atlanta, Georgia.
The firm views the acquisition as strategically significant and fairly priced, anticipating approximately 8% earnings per share accretion and a tangible book value earn back period of less than three years.
The acquisition is expected to add a high-performing franchise to United Bankshares' portfolio, introducing a new growth market that should contribute to stronger loan growth.
Following the announcement, United Bankshares' shares experienced a slight uptick, outperforming the KRX index by 1%. The deal's solid metrics and the reduced risk due to the smaller size of the acquisition—representing only 7% of United Bankshares' assets—were well received by the market.
DA Davidson notes that United Bankshares has historically offered better than peer returns, with a pre-provision net revenue return on average assets (PPNR ROAA) of approximately 1.7% and a normalized return on tangible common equity (ROTCE) of around 14%. These strong performance indicators are believed to be already factored into the company's premium valuation, which stands at 12.9 times the 2025 estimated earnings and 1.6 times the tangible book value.
The firm reiterates its Neutral stance on United Bankshares, citing a total return of 9% to the newly set target price.
InvestingPro Insights
Following DA Davidson's recent analysis of United Bankshares Inc. (NASDAQ: UBSI), InvestingPro provides additional insights that may be of interest to investors. United Bankshares has demonstrated a commitment to shareholder returns, having raised its dividend for an impressive 35 consecutive years, and maintained dividend payments for 41 consecutive years. This track record could be a significant factor for income-focused investors. Additionally, with a P/E ratio of 13.13 and a price to book ratio of 0.97 as of the last twelve months up to Q1 2023, the company presents a valuation that might appeal to value investors.
However, it is important to note that three analysts have recently revised their earnings expectations downwards for the upcoming period, which could signal caution for growth-oriented investors. Despite this, analysts predict the company will be profitable this year, a sentiment supported by the company's profitability over the last twelve months. With a market capitalization of $4.64 billion and a dividend yield of 4.3%, United Bankshares is positioned to attract those looking for stability and steady income.
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