Is Cullen/Frost Bankers (CFR) Fully Valued Heading Into Its July 30 Earnings?

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Cullen/Frost Bankers (CFR) heads into its upcoming July 30 earnings report with expectations for higher revenue and a year over year earnings increase, which is keeping investor attention firmly on the stock.

See our latest analysis for Cullen/Frost Bankers.

The recent 1-month share price return of 8.83% and year-to-date share price return of 28.13% suggest momentum in Cullen/Frost Bankers ahead of its earnings update, while the 5-year total shareholder return of 77.48% points to a solid longer-term outcome for investors who have held through the cycle.

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The recent move in Cullen/Frost Bankers can be read two ways: as a simple swing in sentiment ahead of earnings, or as a clearer reflection of the underlying business. The next step is to see what the current valuation implies.

Most Popular Narrative: 3.3% Overvalued

Cullen/Frost Bankers is trading at a last close of $164.23 against a most-followed narrative fair value of $159, setting up a tight valuation debate for investors.

The analysts have a consensus price target of $159.0 for Cullen/Frost Bankers based on their expectations of its future earnings growth, profit margins and other risk factors.

However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $169.0, and the most bearish reporting a price target of just $139.0.

Read the complete narrative.

Want to see what is really driving that tight valuation range? The narrative leans heavily on steady revenue growth, resilient margins and a richer future earnings multiple. Curious which specific assumptions need to hold for $159 to stack up against $164.23?

Result: Fair Value of $159 (OVERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, Cullen/Frost Bankers is still exposed to Texas focused credit shocks and higher funding costs. Either of these factors could challenge the current growth driven narrative.

Find out about the key risks to this Cullen/Frost Bankers narrative.

Another View: Cullen/Frost Bankers Through A Cash Flow Lens

The analyst narrative has Cullen/Frost Bankers trading about 3.3% above its $159 fair value, which points to a slight premium. Our DCF model tells a very different story, with a future cash flow value of $237.83 per share, leaving the current $164.23 price at a 30.9% discount. Which signal do you put more weight on?

For a closer look at how this cash flow view is built, step through the SWS DCF model in full, then compare the assumptions with your own expectations for Cullen/Frost Bankers. Use the detailed calculation as a cross check rather than a verdict, Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Cullen/Frost Bankers for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Next Steps

With sentiment on Cullen/Frost Bankers split between modest overvaluation and a sizeable cash flow discount, it makes sense to check the details yourself and decide quickly where you stand. To see what aspects of the story investors are most optimistic about, take a closer look at the 3 key rewards

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include CFR.

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