The price of SmartFinancial (NASDAQ: SMBK) shares surged almost 7% over the past five days.
SmartFinancial is a provider of various financial services to individuals and corporate customers. It operates more than 30 branches throughout East and Middle Tennessee, Alabama, and the Florida panhandle, and offers an array of banking products, including mortgage banking.
The company, with a market capitalization of $379.3 million, witnessed its stock move higher by 38.6% over the past six months. In addition to the above, over the past year, SmartFinancial shares have gained 56.9%. (See SmartFinancial stock chart on TipRanks)
Will Acquisitions Drive SmartFinancial’s Growth?
On May 10, SmartBank added eight new bankers to its team in a bid to expand its presence in the Florida Panhandle and Southern Alabama coastal markets.
On May 3, SmartFinancial’s subsidiary SmartBank agreed to acquire Fountain Leasing. The deal provides SmartBank with a specialty lending platform that offers construction equipment financing to small- and medium-sized businesses throughout the Southeast.
SmartFinancial CEO Billy Carroll said, “The opportunity to diversify our business lines and expand these services across our footprint is what attracted us to this opportunity.”
On April 14, the company announced its intention to acquire Sevier County Bancshares, Inc. (SCB). The proposed deal is expected to make SmartFinancial the market leader in Sevier County, and the 4th largest community bank headquartered in Tennessee, with total consolidated assets of more than $3.7 billion.
The series of acquisitions are expected to drive loan growth prospects for SmartFinancial and bring in diversification. They will also expand its presence in these regions by adding new clients, thereby expanding the customer base of the company.
Analyst’s Growing Optimism on SMBK
On June 11, Raymond James analyst Ammar Samma maintained a Buy rating on the stock based on the virtual investor meetings hosted by management, including President & CEO Billy Carroll.
The analyst said, “The overall tone of the meetings was quite positive, where conversation circled around: 1) the company’s recent acquisitions 2) the health of its primary markets and its loan growth expectations; and 3) management’s overall outlook moving forward, including margin trends and its growth strategy.”
The company believes that core margin has reached its bottom and should recover from these levels. On the loan front, management remains positive about the strength of its markets in the Southeast region and anticipates targeting mid-to-high single digit loan growth in the near future. Furthermore, the company could also look out for more acquisitions in a bid to expand its presence in markets like Alabama and Nashville.
The analyst added, “Overall, management is focused on leveraging technology, modernizing the bank, and improving processes. The company now remains asset sensitive and is positioned well for an eventual rising rate environment.”
Samma remains optimistic about the future prospects of the company. He believes the Fountain Leasing deal could add 10-15 basis points to Smart’s margin profile going forward.
Earnings Details
On April 20, SmartFinancial reported impressive first quarter numbers. The company posted Q1 adjusted earnings of $0.65 per share, up 116.7% from the year-ago quarter and also outpaced the Street estimates of $0.54.
Tangible book value per share came in at $18.39, reflecting an annualized quarter-over-quarter increase of 10.5%. Net interest income was $26.3 million in Q1, versus $26.5 million in the year-ago quarter.
The strong earnings performance has definitely left an impact on the minds of investors. Since the earnings release, the share price of SmartFinancial has been witnessing an upward trajectory.
Analyst Opinion Post-Earnings Announcement
The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 2 Buys. The average SMBK analyst price target of $26 implies 3.5% upside potential from the current levels.
Raymond James analyst Ammar Samma maintained a Buy rating on the stock and increased the price target to $27.00 from $24.00. This implies 7.5% upside potential to current levels.
Samma commented, “We expect continued, sound underlying trends out of SMBK, and continue to believe the Sevier County deal is a strategic/financial winner. Ultimately, with shares trading at a meaningful discount to peers on earnings, and our new model shaking out at abovepeer profitability, we see the risk/reward dynamic as very attractive with what are seemingly numerous tailwinds for Smart.”
TipRanks Vital Metrics
TipRanks data shows that financial blogger opinions are 100% Bullish on SMBK, compared to a sector average of 70%.
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your analysis before making any investment.
