EFG International shares jumps after UBS upgrades to 'buy' on stronger outlook

Investing.com -- Shares of EFG International (SIX:EFGN ) jumped over 7% on Wednesday following an upgrade by UBS analysts, who raised the stock's rating to "buy" from a previous "neutral." 

UBS's upgrade was boosted by upward revisions to EFG's earnings per share forecasts, reflecting anticipated benefits from market conditions, currency dynamics, and a restructured revenue model. 

EPS estimates were raised by 5% for 2024, 3% for 2025, and 2026, respectively. Analysts project that net new money inflows will continue within the 4–6% target range, underpinned by robust hiring efforts and supportive market performance.

In addition to promising NNM trends, UBS flagged EFG's above-average asset growth and profitability metrics, citing its gross margin normalization at levels exceeding the company’s conservative targets. 

EFG’s performance contrasts positively against its peers, showcasing superior flow and cost management.

The valuation narrative also played a pivotal role. EFG's shares, previously range-bound due to investor concerns over margin normalization and limited share buybacks, are now positioned for re-rating. 

UBS forecasts a higher valuation based on factors such as better operating leverage, earnings upgrades, and underappreciated excess capital. The potential for extraordinary dividends or increased mergers and acquisitions adds to the attractiveness of the stock.

The bank's strong balance sheet and excess capital of over CHF 500 million—much above management's target—offer further upside potential. This financial flexibility enhances its ability to pursue growth opportunities or increase shareholder returns through dividends.

UBS set a price target of CHF 14.1, a 7.6% increase from its previous forecast, suggesting confidence in EFG's near-term catalysts, including the anticipated February 2025 earnings report. 

With these upgrades, EFG's stock price has seen renewed interest, reflecting heightened optimism in its growth trajectory and financial prospects.

Source: Investing.com