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Compass Point downgrades Entegra Financial stock rating to 'neutral' from 'buy'

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Compass Point downgrades Entegra Financial stock rating to 'neutral' from 'buy'

Downgrades

Piper Jaffray analyst Matthew Breese downgraded Lancaster, Pa.-based Fulton Financial Corp.'s stock rating to "neutral" from "overweight" and lowered the price target to $17.50 from $19.

According to Breese, recent credit hiccups and lower peer valuations warrant a lower price target based on 12.5x the analyst's 2020 EPS estimate, compared to 13.0x his 2020 EPS estimate previously. The bank, like other asset-sensitive banks, will be affected by the Federal Reserve's change in stance toward interest rate hikes.

Higher provision estimates, higher tax rate and moderately lower loan growth led the analyst to lower his EPS estimates to $1.35 from $1.40 for 2019, and to $1.38 from $1.45 for 2020.

The credit-related issues in 2018 are not normal for the bank according to the analyst, as it is thought of as a high-quality lender.

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Laurie Hunsicker from Compass Point Research downgraded Franklin, N.C.-based Entegra Financial Corp.'s stock rating to "neutral" from "buy," and lowered the price target to $21.50 from $27, following the announcement of its proposed merger with Knoxville, Tenn.-based SmartFinancial Inc.

The analyst lowered the price target considering what she believes will be a sell-off in SmartFinancial's exchange ratio-adjusted stock price.

Hunsicker based the valuation on franchise footprint, which includes acquisition track record; current pricing relative to peers; capital and capital management tools; management expertise; and credit.

The analyst's operating EPS estimates for Entegra are $2.02 for 2018, $2.19 for 2019 and $2.52 for 2020.