BMO: Future Performance Will Reflect U.S. Divestitures And Earnings Recovery Trends

The analyst price target for Bank of Montreal has increased modestly, rising from C$171 to approximately C$176. Analysts cite improved U.S. operations and stronger revenue growth expectations as key factors supporting the upward revision.

Analyst Commentary

Recent Street research on Bank of Montreal reflects a mix of optimism over future earnings potential and caution regarding current valuation and operational hurdles. The following perspectives summarize recent analyst commentary.

• Bullish analysts are raising price targets, citing improved performance in U.S. operations and a growing revenue outlook.
• Upgrades are driven by perceived upside in earnings potential, attributed to lower credit losses, better operating efficiency, and a positive outlook for investment banking activities.
• Consensus estimates for the sector are seen as conservative, which provides room for Bank of Montreal to exceed expectations if current trends continue.
• The stock has shown resilience, rebounding from prior credit challenges and positioning itself as a sector outperformer for those positive on future execution.

• Bearish analysts are cautious, noting that recent improvements, particularly in U.S. provisions for credit losses, may already be reflected in the share price.
• Some have downgraded their outlook, expressing concerns about the sustainability of current growth momentum and the bank’s ability to consistently outperform peers.
• Valuations are seen by some as stretched following the recent rally, with a risk of underperformance if future results do not match elevated expectations.
• There is a focus on monitoring the ongoing impact of credit trends and operational execution to justify higher price targets.

What's in the News

• Bank of Montreal has launched a sale process for some of its U.S. branches with approximately $6 billion in deposits. This may potentially include loans and a full exit from markets in Wyoming and the Dakotas (The Wall Street Journal).
• BMO announced that five new Canadian depositary receipts (CDRs) will begin trading on the Cboe Canada exchange. This expansion provides Canadian investors with greater access to U.S. companies such as Apple, Intel, Mastercard, Pfizer, and Visa.
• BMO Financial Group introduced a new no-fee credit monitoring and reporting tool, BMO Credit Coach. This service is available through its Mobile Banking app and Online Banking to help clients improve financial literacy and manage credit health.
• BMO recently unveiled a multi-year partnership with Instacart. This partnership allows eligible Canadian BMO credit cardholders access to exclusive Instacart+ benefits and grocery savings.
• BMO and Borrowell partnered to provide Canadians with a six-month Crave streaming subscription when they select certain banking products. This partnership enhances value and rewards for new customers.

Valuation Changes

• Consensus Analyst Fair Value has risen slightly, increasing from CA$171 to approximately CA$176.
• Discount Rate is virtually unchanged, moving marginally from 7.71% to 7.71%.
• Revenue Growth has inched higher, rising from 6.78% to 6.85%.
• Net Profit Margin has edged lower, going from 25.28% to 25.22%.
• Future P/E ratio has increased slightly from 14.94x to 15.37x.