EWBC

Regional Bank Performance: In 2024, major US banks reported a 20% increase in net profits, with regional banks also showing strong earnings growth despite lagging behind the broader market. East West Bancorp, Inc. (NASDAQ:EWBC) stood out with significant revenue growth and a dividend increase, ranking 11th among the best regional bank dividend stocks.

Investment Opportunities: The banking sector remains attractive for investors due to its high dividend payouts, with regional banks trading at historically low valuations. Analysts suggest that while EWBC is a solid investment, there may be other undervalued dividend stocks with greater potential for higher returns.

Validea's Low PE Investor Model: The model based on John Neff's strategy has upgraded ratings for East West Bancorp Inc (EWBC) and Intercorp Financial Services Inc (IFS), both showing improved fundamentals and stock valuations, with scores rising to 79%.

About John Neff and Validea: John Neff is recognized for his conservative investment approach that yielded significant returns over three decades. Validea offers investment research based on strategies from renowned investors like Neff, aiming to help investors outperform the market.

CEO Stock Sale: East West Bancorp's CEO Dominic Ng sold 19,800 shares of common stock on March 19th for a total of $1.78 million.

Analyst Price Target Adjustments: Morgan Stanley and BofA have lowered their price targets for East West Bancorp to $118 and $109, respectively.

Value Investing Overview: Value investing focuses on selecting stocks that are undervalued compared to their intrinsic value, using metrics like the price-to-earnings (P/E) ratio to identify potential investments with strong fundamentals and growth prospects.

Highlighted Stocks: This week’s recommended stocks include Sysco (SYY), Uber Technologies (UBER), and East West Bancorp (EWBC), all showing significant upside potential based on their current P/E ratios and analyst price targets.

Morgan Stanley's Price Target Adjustment: Analyst Manan Gosalia has lowered East West Bancorp's price target from $127 to $118 while maintaining an Overweight rating, citing increased uncertainty and a slower economic growth outlook for Midcap Banks in North America.

Sector Challenges: The firm highlights that changes in trade and tariff policies, along with a higher level of policy uncertainty, are negatively impacting the banking sector, leading to multiple price target reductions across the group.

SCHD Stock Performance: The Schwab U.S. Dividend Equity ETF (SCHD) has increased by 1.65% in the last week and 11.95% over the past year, with a Moderate Buy consensus from analysts and an average price target suggesting an 11.44% upside.

Holdings Analysis: SCHD's top five holdings with the highest upside potential include Synovus and APA Corp., while those with the greatest downside risk include The Hershey Company and Altria. The ETF has a Smart Score of seven, indicating expected market performance.

Banking Sector Outlook: Bank of America analysts warn that bank stocks could face significant declines, potentially dropping 48% in a recession scenario, as economic indicators show signs of slowing growth and rising layoffs.

Investment Recommendations: While a recession is not the firm's base case, if economic conditions improve, analysts suggest increasing investments in top banking franchises like JPMorgan and Goldman Sachs, highlighting potential earnings downturns for large and mid-cap banks.

BofA Price Target Adjustment: Bank of America lowered its price target for East West Bancorp (EWBC) from $120 to $109 while maintaining a Buy rating, reflecting an average 6% reduction in price targets across its bank coverage due to concerns over growth and rising capital costs.

Economic Outlook: Despite acknowledging the risks of a recession and market selloff impacting wealth, BofA does not consider a recession as its base case and suggests that if economic adjustments lead to stronger growth, it may increase exposure to top banking franchises.

Insider Trading Activity: Dominic Ng, CEO of $EWBC, sold 20,181 shares for approximately $1.8 million, representing about 2% of his holdings, while insiders have made 10 sales and no purchases in the past six months.

Institutional Investor Movements: In the latest quarter, 242 institutional investors increased their positions in $EWBC stock, while 241 reduced theirs, indicating mixed sentiment among large shareholders.

Investment Strategy: Selecting securities or funds based on current interest or dividend payouts can provide immediate income, but focusing on increasing dividend income may yield better long-term results.

Investment Options: Investors have various choices, including mutual funds and exchange-traded funds that focus on companies with a history of steady payout increases, as well as opportunities to invest in individual stocks.

Analyst Ratings Overview: East West Bancorp's analyst ratings show a mix of bullish and bearish sentiments, with recent price targets averaging $121.0, indicating an increase from previous estimates. Analysts have made various adjustments to their ratings based on market conditions.

Financial Performance Insights: The bank demonstrates strong financial health with a net margin of 46.36% and a return on equity of 4.02%, although its revenue growth rate of 1.46% lags behind industry peers, and it has a higher debt-to-equity ratio than the industry average.

U.S. Stock Market Overview: U.S. stock futures are slightly lower, with Nasdaq futures down 0.1%, while several companies, including Ericsson and Mineralys Therapeutics, saw significant pre-market declines after disappointing earnings reports.

Ericsson's Financial Results: Ericsson reported a 1% year-over-year sales growth to 72.9 billion Swedish Krona but missed analyst expectations for both sales and EPS, leading to an 8.7% drop in its share price during pre-market trading.

Boeing and Texas Instruments Performance: Boeing's shares fell nearly 2% after announcing a projected loss of $5.46 per share for Q4, impacted by a labor strike, while Texas Instruments also saw a decline of over 2% due to a disappointing earnings forecast despite beating previous quarter estimates.

Mixed Results for Other Companies: CSX reported a revenue miss leading to a 2% drop in shares, Intuitive Surgical's stock dipped despite better-than-expected earnings, East West Bancorp's shares fell 3% after narrowly missing earnings expectations, while Twilio's shares surged over 11% following a positive profit forecast.

Earnings Overview: East West Bancorp reported earnings of $1.166 billion ($8.33 per share) for the full year, slightly up from last year's $1.161 billion ($8.18 per share), but fell short of analysts' expectations of $8.36 per share.

Revenue Performance: The company's revenue increased by 0.4% to $2.619 billion compared to $2.609 billion in the previous year.

Financial Performance: East West Bancorp reported a net income of $1.2 billion for 2024, with a fourth quarter net income of $293 million, marking record revenue and earnings per share growth, alongside a 12% increase in book value per share year-over-year.

Community Support and Future Plans: The company expressed support for communities affected by wildfires in Southern California and announced a $300 million share repurchase authorization along with a 9% increase in its common stock dividend, reflecting strong capital and profitability.

Conference Call Announcement: East West Bancorp (EWBC) will hold a conference call on January 23, 2025, at 5:00 PM ET to discuss its Q4 24 earnings results.

Access Information: The live webcast can be accessed through their investor relations website, and listeners can join the call by dialing specific US or international numbers provided.

Earnings Report: East West Bancorp's Q4 adjusted earnings fell short of analyst expectations, leading to a 7.2% drop in after-hours trading; however, total revenue exceeded estimates and the company announced a $300M stock buyback.

Future Outlook: The bank anticipates a 4%-6% increase in net interest income for 2025 and expects minimal impact from recent wildfires in Los Angeles, despite a significant rise in provisions for credit losses.

Major Earnings Reports: Key companies expected to report earnings after the market closes on Thursday include Texas Instruments, Intuitive Surgical, CSX Corporation, Columbia Banking System, and East West Bancorp.

Additional Earnings Releases: Other companies set to release their earnings after Thursday's close include CUBI and SLM.

2024 Mutual Fund Performance: The best mutual funds of 2024 significantly outperformed the market, largely due to heavy investments in major tech companies known as the "Magnificent Seven," while small- and mid-cap funds performed better than large-cap funds that struggled to keep up with the S&P 500's gains.

Outlook for 2025: Looking ahead to 2025, fund managers express caution due to elevated market risks, high valuations, and potential impacts from economic policies and interest rates, prompting them to seek value in sectors like energy, materials, and travel.

Midcap Bank Stock Performance: Midcap bank stocks have dropped about 15% since November, despite positive signs for net interest margins due to improved deposit pricing and core deposit growth, which are expected to enhance net interest income through 2025.

Analyst Recommendations: Analyst Manan Gosalia suggests that this is a favorable entry point for midcap banks trading below historical multiples, with several banks like M&T Bank and East West Bancorp receiving Overweight ratings, while others maintain Hold ratings.