Post by
bartno12001 on Aug 28, 2024 8:05am
Scotia analyst on bmo
Reduces to sector perform and target price to $112. It is likely bmo will come down to low 100s by end of this year
Latest Research (August 28, 2024): OUR TAKE: Negative. After three consecutive EPS misses, we are shifting to a Sector Perform rating on BMO. A downgrade now, especially with the stock down 6.6% on earnings day, may seem backward looking, but while we can still see a bullish path forward here, what has changed is our confidence in its ability to emerge over the coming few quarters. Whether or not BMO ends up being a negative outlier this credit cycle, Street EPS estimates for both this year and next year need to come down (once again) to reflect elevated impaired PCL guidance that even Management is finding difficult to forecast. On top of that is continued pressure on the multiple. BMO shares came into earnings day trading at a 7% discount to peers based on consensus F2025 EPS, but that is on EPS estimates that probably need to come down by about 5% from here. The silver lining is the bank’s strong PTPP performance could get an extra boost next year as rates cuts stimulate demand for credit in the US, but none of that is likely to move the stock materially higher until we see evidence of a credit inflection. The problem is that could take us well into next year, leaving better near-term upside at peers.