Jefferies initiates Webster Financial with Buy, sets $65 target

On Tuesday, Jefferies began coverage on Webster Financial (NYSE:WBS), assigning the bank a Buy rating and establishing a price target of $65.00. The new rating underscores Jefferies' positive stance on the financial institution, driven by several key factors. According to InvestingPro data, Webster Financial currently trades at $52.65, with analyst targets ranging from $50 to $72, suggesting potential upside aligned with Jefferies' outlook.

The research firm's analyst cited Webster Financial's above-average profitability as a primary reason for the bullish outlook. This assessment is supported by InvestingPro data showing a healthy 9% return on equity and a 39-year track record of consistent dividend payments. The company's distinctive and diversified deposit base was also highlighted as a contributing factor to its favorable assessment. Webster Financial's robust capital generation, which supports its share buyback programs and maintains a 3.05% dividend yield, further bolsters the rationale behind the Buy rating.

In addition to these internal strengths, Jefferies pointed to the relative valuation of Webster Financial's shares. The firm noted that the company's stock is currently trading at a significant discount compared to its industry peers, with InvestingPro data showing a P/E ratio of 11.78x. While InvestingPro's Fair Value model suggests the stock is currently trading near its fair value, the company maintains a "GOOD" overall financial health score, with particularly strong marks in profitability and relative value metrics.

The potential for increased merger and acquisition (M&A) activity in the banking sector was also mentioned as a positive influence on Webster Financial's prospects. Jefferies suggested that the company could become an attractive target for acquisition in the context of a more active bank M&A environment.

Webster Financial's new price target of $65.00, as set by Jefferies, represents the firm's expectation for the stock's performance. This target is informed by the analysis of the company's financial health, market position, and potential for growth within the banking industry.

In other recent news, Webster Financial Corporation reported its first-quarter 2025 earnings, which revealed a slight miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $1.30, falling short of the anticipated $1.38, while revenue came in at $704.8 million compared to the forecasted $707.12 million. Despite these misses, Webster Financial demonstrated asset growth, with total assets reaching $80 billion, and experienced deposit growth of over $800 million. Additionally, Webster Financial announced an expansion of its stock repurchase program by $700 million, indicating a robust capital position and a strategic focus on returning value to shareholders. The company also maintained its net interest margin at 3.48% and projected full-year loan growth of 4-5% with net interest income expected to reach $2.5 billion. Analyst firms have not reported any upgrades or downgrades for Webster Financial at this time. The company is advancing with new product developments, including a new Health Savings Account product suite and a joint venture with Marathon, expected to commence later in the year.

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