FBR Capital Cuts Price Target on HomeStreet (HMST) Following 3Q Miss

FBR Capital reiterated an Outperform rating on HomeStreet (NASDAQ: HMST), and cut the price target to $29.00 (from $32.00), following the company's 3Q15 earnings results. HMST reported 3Q15 GAAP EPS of $0.45, missing the Street at $0.55. Management remains focused on building out its traditional banking platform and strengthening its mortgage banking platform.

Analyst Paul Miller commented, "We are maintaining our Outperform rating and FBR Top Picks status on shares
of HomeStreet. However, we are lowering our price target to $29, from $32, to reflect our lower earnings expectations for the company in FY16 given the current environment. Our price target equates to 11.6x our updated FY16E EPS of $2.50 and 1.5x 3Q15 TBV of $19.95, which is still a discount to small-cap peers trading around 14x FY16E EPS and 1.6x TBV. That said, we continue to believe in the strength of HomeStreet's revenue-generating initiatives as management remains focused on building out its traditional banking platform and strengthening its mortgage banking platform. As such, we expect the company's earnings stream to become more diversified and less volatile, which should result in shares garnering a multiple closer to peers. Following 3Q15 results, we are lowering our FY15 operating EPS estimate to $2.03 from $2.41 and our FY16 EPS estimate to $2.50 from $3.00. The primary drivers of our lower estimates are lower mortgage banking and servicing revenues coupled with higher operating expenses, which offset the benefit of increased loan growth and lower credit costs."

For an analyst ratings summary and ratings history on HomeStreet click here. For more ratings news on HomeStreet click here.

Shares of HomeStreet closed at $21.13 yesterday.

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