Stephens analyst Matt Olney reiterated the Overweight rating on Home BancShares, Inc. HOMB, raising the price target to $27 from $26.

HOMB’s 2Q23 results were highlighted by solid core fees and lower LLP expenses that drove EPS results in line with the consensus forecast, the analyst notes. 

However, NII was soft due to loan balance contraction (-6% LQA) and deposit remix headwinds (avg NIBs -6% LQ). 

After the 2Q results, the analyst increased 2023 Op EPS from $1.97 to $1.99 to account for the latest quarterly beat. 

The analyst, however, lowered the 2024 EPS forecast from $1.80 to $1.78 to account for a smaller balance sheet and a more moderate pace of buyback activity.

Olney estimates there are ~17.9 million shares available for repurchase under the company’s approved stock repurchase program. 

The analyst expects management will likely remain active in their repurchase activity and assumes the 1H23 rate (~560K shares per quarter) will continue into 2H23.

The analyst expects the company to remain conservative with new originations and forecasts modest loan growth contraction in 2H23 (4% LQA). 

Management noted that while they are open to M&A, they want to avoid taking on another bank’s problems, and pricing expectations remain too high, notes Olney.

Overall, management expects a moderate decline in the margin going forward, and the analyst forecasts six bps of core NIM compression in 3Q23 and another five bps in 4Q23. 

Olney expects NII growth in 2023 at +9% and a slight decline of -4% in 2024.

Price Action: HOMB shares are trading lower by 2.71% to $23.49 on the last check Friday.

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