Home Bancshares, Inc. (HOMB) Earnings Outlook for 2024
Home Bancshares, Inc. (HOMB) is projected to report earnings of $1.97 per share for 2024, reflecting a modest increase of 1.8% compared to the previous year. This growth will primarily stem from the company’s loan expansion, but the anticipated contraction in margins will dampen the overall earnings potential.
Margin Contraction to Limit Earnings Growth
Home Bancshares’ net interest margin has experienced a steady decline over the past several quarters, and this trend is expected to continue in the remaining nine months of 2024. The company anticipates a six basis point reduction in its net interest margin due to the Federal Reserve’s rate cuts. While the company’s loan re-pricing will outpace deposit re-pricing in the short term, the overall impact on the margin will be negative.
Loan Growth to Remain Steady
Despite the margin headwinds, Home Bancshares’ loan portfolio is projected to maintain a steady growth rate of 0.6% per quarter through the end of 2024. This translates to a full-year loan growth of 2.4%. The company’s wide geographical footprint, with operations in Arkansas, Florida, Texas, South Alabama, and New York City, provides diversification and supports the ongoing demand for commercial and industrial loans. Additionally, the stability of the company’s local economies and positive economic indicators, such as the manufacturing and services purchasing managers’ indices (PMI), bode well for commercial loan growth.
Balance Sheet and Income Statement Estimates
Other balance sheet items, including deposits, borrowings, and equity, are expected to expand in line with the projected loan growth. The following table summarizes the key assumptions and estimates for Home Bancshares’ balance sheet and income statement:
| Financial Metric | 2023 | 2024E |
|—|—|—|
| Net Loans (USD million) | 14,136 | 14,481 |
| Growth of Net Loans | 0.1% | 2.4% |
| Net Interest Income (USD million) | 827 | 821 |
| Non-Interest Income (USD million) | 170 | 179 |
| Net Income – Common Sh. (USD million) | 393 | 397 |
| EPS – Diluted ($) | 1.94 | 1.97 |
Valuation and Target Price
To value Home Bancshares, the analyst employed a combination of price-to-tangible book (P/TB) and price-to-earnings (P/E) ratios. Historically, the stock has traded at an average P/TB ratio of 2.05 and an average P/E ratio of 12.5x.
Based on these multiples and the projected tangible book value per share of $12.7 and earnings per share of $1.97 for 2024, the analyst arrives at a combined target price of $25.3 for Home Bancshares. This target price implies a 2.2% upside from the current market price.
Downgrade to Hold Rating
In conjunction with the target price update, the analyst has downgraded Home Bancshares to a hold rating. This adjustment reflects the reduced earnings potential due to the margin contraction and the modest upside in the target price. The dividend yield of 2.9% and the expected payout ratio of 36.5% for 2024 suggest that no significant dividend increase is anticipated.
