Expanding Horizons With Critical Acquisitions And Tech-Driven Efficiency In Growth Markets

Key Takeaways

• Strategic acquisitions and expansions are set to enhance revenue, earnings, and market presence through increased asset base and customer reach.
  
• Focus on technology, automation, and efficiency aims to improve profit margins while benefiting from favorable interest rate conditions.
  
• Rising nonperforming assets and deposit costs, along with slow loan growth and higher expenses, could pressure Glacier Bancorp's margins and future revenue.

Catalysts

Operates as the bank holding company for Glacier Bank that provides commercial banking services to individuals, small to medium-sized businesses, community organizations, and public entities in the United States.

• The acquisition of six Montana branches from Heartland Financial is expected to boost Glacier Bancorp's asset base by $403 million, which could enhance future revenue and earnings through increased customer reach and service capabilities.
  
• Strong organic growth in core deposits, particularly noninterest-bearing deposits which increased 14% annualized, is likely to improve net interest income and contribute positively to the net margins as the cost of funding remains low.
  
• The focus on cost controls and efficiency gains, facilitated by incorporating technology and automation in operations, is expected to maintain or even improve profit margins as the company continues to operate with fewer resources.
  
• Strategic investments in growth markets across eight states, which are experiencing rapid GDP growth, could lead to increased loan origination and deposit growth, positively impacting future revenue and earnings.
  
• The proactive strategy to manage asset and liability repricing, with a focus on lifting loan yields and reducing cost structures, positions the company to benefit from any interest rate cuts, maintaining or improving net interest margins in the near term.

Glacier Bancorp Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Glacier Bancorp's revenue will grow by 15.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 23.4% today to 36.0% in 3 years time.
• Analysts expect earnings to reach $432.0 million (and earnings per share of $3.78) by about November 2027, up from $182.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.5x on those 2027 earnings, down from 34.7x today. This future PE is greater than the current PE for the US Banks industry at 12.8x.
• Analysts expect the number of shares outstanding to grow by 0.28% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.22%, as per the Simply Wall St company report.

Glacier Bancorp Future Earnings Per Share Growth

Risks

• The slight increase in nonperforming assets and early-stage delinquencies, along with some normalization in asset quality, could pose risks to credit quality, impacting net margins and possibly leading to higher credit loss expenses.
  
• The migration of deposits from noninterest-bearing to interest-bearing accounts could increase the total cost of funding, potentially squeezing the net interest margin if interest rates rise or if deposit costs increase unexpectedly.
  
• Organic loan growth was slower than expected, with continued uncertainty over economic conditions impacting loan demand. This could affect future revenue growth and earnings if demand does not pick up.
  
• The effects of seasonality, such as agriculture paydowns in the fourth quarter, might hamper loan growth, thus affecting revenue generation during this period.
  
• The rise in noninterest expenses, especially related to regulatory compliance and third-party consultants, could exert pressure on net margins if not carefully managed against revenue growth.

Valuation

• The analysts have a consensus price target of $52.33 for Glacier Bancorp based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $57.0, and the most bearish reporting a price target of just $45.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $1.2 billion, earnings will come to $432.0 million, and it would be trading on a PE ratio of 16.5x, assuming you use a discount rate of 6.2%.
• Given the current share price of $55.84, the analyst's price target of $52.33 is 6.7% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.