Wells Fargo upgrades Pinnacle Financial stock on integration progress

Wells Fargo has raised its rating on Pinnacle Financial Partners (NASDAQ:PNFP) stock to Overweight from Equal Weight, citing strong progress in the integration of the two companies. The firm has set a price target of $118.00, indicating that Pinnacle is currently undervalued. Wells Fargo's analysis suggests that the merger integration has not disrupted banker hiring or retention, and management appears to have learned from previous merger of equals, such as the STI/BBT deal, where integration uncertainty boosted Pinnacle's recruiting efforts.

Pinnacle's core conversion remains the next major test. The stock trades at 8x 2027 estimated earnings per share, lower than the 10x for the KRE. Analysts believe investors are undervaluing the company's potential for low-double-digit loan growth and high-teens return on tangible common equity. Pinnacle's stock currently has a P/E ratio of 13.6 and an 8% return on common equity.

Recent developments include Pinnacle reporting adjusted diluted earnings of $2.50 per share in Q2, surpassing expectations of $2.46 per share, while revenue fell short of forecasts at $1.2 billion compared to the anticipated $1.24 billion. Despite these results, the company has gained deposit market share since the merger announcement, unlike the losses experienced following the STI/BBT deal.

Benchmark recently lowered its price target for Pinnacle Financial from $132 to $125 while maintaining a Buy rating, and revised its earnings estimates downward.