Banking, finance, and taxes

Analysts Hiking BMO Price Targets After Earnings and Dividend News

Jon C. Ogg

Published: December 6, 2017 12:25 pm

Last Updated: January 12, 2020 5:42 am

Canadian banking giant Bank of Montreal (NYSE: BMO), which is also a substantial player in the United States, has seen a warm reception to the earnings and dividend announcement. Its New York–listed American depositary shares have risen on a day where most of the market and most of the financial sector was simply looking for direction.

In the company’s news flow, BMO raised its dividend by 6% from this time a year ago. That will take the dividend yield to roughly 3.7%, even after the stock traded higher.

BMO Financial Group reported on Tuesday that its quarterly net income was $1.227 billion (down 9%) and its adjusted net income was $1.309 billion (down 6%). The notes in the press release showed that the fourth quarter’s net income included elevated reinsurance claims of $112 million after the impact of hurricanes Irma, Maria and Harvey. That was shown to have reduced BMO’s net income growth by approximately 8%.

BMO’s U.S. segment has achieved 13% compound growth over the past two years on a U.S. dollar basis. That contributed 25%, or $1.4 billion, to bank earnings. For fiscal 2017, the following earnings metrics were released:

• Net income of $5.35 billion (up 16%)
• Adjusted net income of $5.508 billion (up 10%)
• Earnings per share of $7.92 (up 14%)
• Adjusted earnings per share of $8.16 (up 9%)

Again, analysts have by and large been positive. Many of the Canadian brokers issuing research reports and price targets have updated those targets in Canadian dollars rather than in U.S. dollars. This matters because BMO’s average daily volume of its common stock is more than 1.2 million shares per day, compared with only about 350,000 shares per day of its shares traded on the New York Stock Exchange.

Here are some of the analyst price target hikes that have been seen after the earnings and dividend hike (in Canadian dollars):

• Barclays to C$98 from C$97
• Canaccord Genuity to C$105 from C$103
• Credit Suisse to C$103 from C$102
• National Bank of Canada to C$103 from C$100
• RBC Capital Markets to C$116 from C$108
• Scotia Capital to C$114 from C$112

Darryl White, chief executive officer of BMO Financial Group, said of the year and looking forward:

We are making good progress against our financial and strategic objectives. In 2017, we delivered positive adjusted net operating leverage of 1.9% building on the 2.1% achieved last year and leading to an improvement in the adjusted net efficiency ratio of 240 bps since 2015. We did so while investing more in digital capabilities, providing customers with innovative products and services. We improved the CET 1 Ratio to 11.4% and, at the same time, grew our business and returned earnings to our shareholders through higher dividends and share buybacks.

We start 2018 from a position of strength, with diversified and competitively advantaged businesses, a team of highly engaged, customer-focused employees and a solid technology and data foundation. I am confident that we will build on these core capabilities to accelerate growth, improve efficiency and drive customer loyalty. We are well-positioned to capture the opportunities in an evolving market environment and deliver sustainable profitability going forward.

Bank of Montreal was up 0.85% to $78.71 on Wednesday in New York trading. Its local shares were up 1.5% at C$100.69 in Toronto.