An update has just come out today on HSBC Holdings plc (HBC), in which senior financial services analyst Ann H. Heffron, CFA is restating her Hold rating on the company. We excerpted the following details:
'We are continuing our Hold on HSBC Holdings plc (or HSBC), but raising our target price to $100. HSBC is expected to report its third quarter trading update in early December. We are maintaining our diluted EPADS estimates at $8.00 for 2007 and $8.75 for 2008.
'Earnings should be supported by strong loan and deposit growth, especially in emerging markets, and improved productivity, partially offset by increased impairment charges due to problems in the US sub-prime portfolio and weakness in the UK. HSBC recently announced the $6.3 billion acquisition of a 51% stake in Korea Exchange Bank, the sixth largest bank in Korea.
'In the first half of 2007, HSBC posted net earnings of $9.8 billion, up 13% year-over-year due to strong growth in trading and fee income. HSBC increased its first 2007 interim dividend by 13% to a $4.35 annual rate. At its current price, HSBC is trading at 12.0X and 11.4X P/E multiples of 2007 and 2008 consensus earnings, respectively. This represents 10% and 4% respective discounts to the industry P/E medians based on consensus earnings, as shown in the following table.
'While HSBC's estimated five-year growth rate of 8% is well below the industry's 12% median, HSBC's dividend offers an above-average yield of 4.5%, which is providing support to HSBC's valuation. Our $100 target price represents roughly an 11½X P/E based upon our $8.75 EPADS estimate for 2008.'
Read the full analyst report on HBC.
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