EBC: Share Repurchases Will Drive Future Upside Despite Activist Pressure

Analysts have slightly raised their price target on Eastern Bankshares from 21.75 dollars to 22.20 dollars. This reflects modestly higher fair value expectations even as they factor in a marginally lower profit margin and a slightly richer future earnings multiple.

What's in the News

• Completed acquisition of HarborOne Bancorp, with HarborOne shareholders receiving either 0.765 Eastern shares or 12.00 dollars in cash per share, and a strong preference shown for stock consideration (Company announcement)
• HoldCo Asset Management, now a roughly 3% shareholder, is publicly urging Eastern Bankshares to pursue a sale instead of further bank acquisitions, criticizing capital allocation and threatening a potential proxy fight (Activist communication)
• HoldCo escalated its campaign with a detailed presentation to Eastern's independent directors, alleging value destruction exceeding the company market capitalization and raising concerns about governance and board independence (Activist communication)
• Board authorized a new share repurchase program allowing buybacks of up to 11.9 million shares, equal to about 5% of issued share capital, through October 31, 2026 (Company announcement)
• Company reports that, under the buyback announced July 25, 2024, it has completed repurchases totaling 4,803,407 shares for 79.17 million dollars, equal to roughly 2.49% of shares outstanding (Company filing)

Valuation Changes

• The fair value estimate has risen slightly from 21.75 dollars to 22.20 dollars per share, reflecting a modestly higher assessed intrinsic value.
• The discount rate has edged down marginally from 6.956 percent to 6.956 percent, a negligible change in the risk and return assumptions.
• The revenue growth outlook is essentially unchanged, moving fractionally from 37.48 percent to 37.48 percent, indicating a stable growth profile.
• The net profit margin has fallen slightly from about 48.01 percent to 47.65 percent, implying a modestly more conservative profitability expectation.
• The future P/E multiple has risen moderately from 6.59 times to about 6.78 times, suggesting a somewhat higher valuation placed on expected earnings.