We are maintaining our Buy on Allied Irish Banks, plc (AIB), as well as our $60 price target as we consider the stock attractive at its current price. In its 2007 full-year report, AIB posted net income of 1.8 billion euro, up 14% from 2006's 1.6 billion euro, but modestly below our estimate due to a higher-than-expected tax rate.
We are reducing our 2008 diluted EPADS estimates to $6.20 from $6.23, partly due to US$ depreciation against the euro. This is in-line with AIB management guidance calling for low single-digit growth in earnings per share.
AIB's results should benefit from solid loan growth offset, in part, by increasing loan impairment provisions from a very low level in 2007 and declining net interest margins due to slow deposit growth and increased competition. AIB just increased its annual dividend to 0.79, or $2.33 per ADS.
At its current price, AIB is trading at 7.2X the 2008 estimate and 6.7X the 2009 estimate, based upon consensus estimates for 2007 and 2008, respectively. These are well below the median P/E ratios for the industry, also based on consensus estimates.
AIB's growth prospects, estimated at 12% over the next few years, match the industry's and its dividend yield exceed the industry median by a wide margin. We are maintaining our Buy recommendation on Allied Irish Banks, plc, as well as our target price of $60, which represents about a 9¾X P/E based on our 2008 estimate of $6.20 per share.
Read the full analyst report on AIB.
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.