FBR Capital Raises Price Target on HomeStreet (HMST) Following Record 3Q
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FBR Capital reiterated an Outperform rating on HomeStreet (NASDAQ: HMST), and raised the price target to $30.00 (from $29.00), following the company's 3Q earnings report. HMST reported 3Q16 operating EPS of $1.12, ahead of the Street's $0.75. Approximately $0.70 is attributable to the residential mortgage banking segment and $0.42 attributable to the commercial and consumer banking segment.
Analyst Paul Miller commented, "After the market close on October 24, HomeStreet, Inc. reported GAAP EPS of $1.11 and operating EPS of $1.12, beating the Street estimate of $0.75 and our estimate of $0.77. This was a record quarter for the company, in which both the mortgage bank and the commercial/consumer bank were strong contributors. Strong refi activity and a rebound in the purchase market boosted mortgage production in the quarter and the company continued to recognize improved operating leverage on the commercial/consumer banking side. While expenses should continue to rise as the company expands the commercial banking platform, we believe operating leverage will continue to improve and that the growth in the segment will benefit the valuation of the stock. Given the healthy macro backdrop for lending, we believe the company has the ability to grow book value rapidly, and we view shares of HMST as valued attractively, currently trading at approximately 1.15x our 2017 year-end TBV estimate of $25.73 per share. We raise our price target to $30 from $29 and highlight HMST as our FBR Alpha Generator pick."
Shares of HomeStreet closed at $24.90 yesterday.
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