Northwest Bancshares, Inc. (NASDAQ:NWBI) is expected to see a decrease in earnings this year due to margin pressure. However, a mid-single-digit loan growth will provide some support to the bottom line. It is anticipated that earnings will decrease by 13% year-over-year to $0.92 per share in 2024 before increasing by 2.2% to $0.94 per share in 2025. Despite the earnings outlook, the market has reacted negatively, leading to an unduly low stock price. There is an expectation for the stock price to correct upwards, and with a high dividend yield, the stock presents an attractive investment opportunity.
Loan growth for Northwest Bancshares has been consistent, with a 0.8% increase in the first quarter of the year. It is projected that loan growth will continue at a similar pace as the economic conditions in the company’s operating states remain stable. However, a reduction in banking offices could impact loan growth in the future.
On the other hand, net interest margin for Northwest Bancshares has been under pressure, with a decline of six basis points in the first quarter of 2024. Further decreases are expected due to anticipated interest rate cuts by the Federal Reserve. This will have a negative impact on net interest income.
The company’s loan portfolio carries some credit risk, particularly from vehicle loans, which account for 17% of the total loan portfolio. Exposure to office loans is limited, reducing overall risk for the company. Despite some risks, Northwest Bancshares is considered to have a low to moderate risk level.
With a stable dividend payout and strong capital position, Northwest Bancshares offers an attractive dividend yield of 6.9%. The company’s historical price-to-earnings and price-to-tangible-book-value multiples suggest a potential upside in the stock price. A combined target price of $12.2 and a total expected return of 12.4% lead to a buy rating on Northwest Bancshares.
In conclusion, despite challenges in earnings and margin pressure, Northwest Bancshares presents a compelling investment opportunity with growth potential and a strong dividend yield.