Raymond James initiates First Financial Bankshares stock coverage at Market Perform

Raymond James has started providing coverage for First Financial Bankshares (FFIN), assigning it a Market Perform rating. Based in Abilene, Texas, First Financial Bankshares has expanded from a single branch in 1890 to an 80-branch institution with around $15 billion in assets. The stock trades at a premium valuation, supported by strong profitability, low-cost deposits, and a healthy credit profile. The company boasts a P/E ratio of 16.34 and a return on equity of 14%, showcasing its efficiency and earning potential.

First Financial Bankshares has a consistent dividend growth history, having increased its dividend for 15 consecutive years. While loan growth has trailed its peers, the bank maintains a low loan-to-deposit ratio and ample liquidity, positioning it well to capitalize on any organic loan growth without significantly increasing higher-cost funding. The bank is exploring a potential acquisition of a Texas institution with assets between $1 and $5 billion.

The current valuation of First Financial Bankshares seems to reflect its strong franchise quality, leaving limited room for further multiple expansion unless there's a notable acceleration in loan growth and earnings. Subscribers to InvestingPro can access five additional exclusive tips, including detailed valuation metrics and growth analysis.

Recently, First Financial Bankshares reported a second-quarter earnings per share of $0.50, meeting analyst expectations. The company's net income rose to $71.89 million, a 7.8% increase from the previous year. Net interest income climbed to $136.91 million, with a net interest margin expanding to 3.90%, driven by lower deposit costs and improved securities yields.

Market analysts have taken differing stances on First Financial Bankshares. Benchmark maintains a Buy rating, acknowledging solid earnings and high profitability with potential for further upside. Cantor Fitzgerald has set a price target of $34, retaining a Neutral rating, while Piper Sandler has initiated coverage with a Neutral rating and a price target of $35. Both analysts project sustained profitability by 2027, with Piper Sandler estimating earnings of $2.05 per share in 2026 and $2.10 per share in 2027.