KeyCorp (KEY) has been generating lots of buzz. It’s a bank holding company that operates through its subsidiary, KeyBank National Association.
As a a bank-based financial services company, KeyCorp delivers a slew of offerings to individual, corporate, and institutional clients including:
- investment management,
- commercial mortgage servicing,
- retail and commercial banking,
- student loan refinancing,
- commercial leasing,
- consumer finance, and
- investment banking.
With all that KeyCorp can do, is it worth the attention of retail investors and traders, or should they look elsewhere within the banking sector for better value investments? Let’s take a look at the numbers.
For KeyCorp’s second quarter of fiscal year 2022, which came to a close at the end of June, the company saw record revenue — KeyCorp reported a net income of $698 million, or $0.72 per diluted common share (which translates to an increase of 8% year-over-year in noninterest income, to be exact).
These numbers are impressive on their own, but they become even more so when looking at KeyCorp’s net income for quarters past: KeyCorp’s first quarter of 2022 saw $591 million, or $0.61 per diluted common share, while second quarter of fiscal year 2021 saw $159 million, or $0.16 per diluted common share.
In addition to this quarterly revenue, KeyCorp also reported that the company’s investment banking and debt placement fees are up 39% from the second quarter of 2021.
What’s more, a recently approved common share repurchase authorization of up to $1.5 billion could see KeyCorp’s shareholder dividends increasing in the very near future — likely in time for the fourth quarter of 2022.
KeyCorp’s Stock Price Forecast
Given the successful quarter KeyCorp had during Q2 of fiscal year 2022, it’s a bit surprising to see that KeyCorp’s stock price forecast is not as overtly positive.
In truth, financial analysts are somewhat divided on the future of KeyCorp stock. Its current price per share sits around $22, which is an increase of nearly 34% over this time last year, but this is nearly half of what KeyCorp stock used to sit at in the late 2000s when the company’s price per share once reached heights of $40 per share.
Looking forward, bullish analysts see KeyCorp stock rising to $27 per share over the next 12 months, while bearish investors see it dropping down to $20 per share by this time next year.
While the median between the two is still positive, it’s not by much: Just above $22, which is barely any higher than the company’s stock price as of late.
Still, in spite of the somewhat weak forecast, KeyCorp continues to exceed expectations quarter after quarter — if this continues to happen, it’s reasonable to expect this forecast to be adjusted for the better.
A discounted cash flow forecast analysis reveals an intrinsic price per share for KEY of $23.51.
KeyCorp’s Long-term Targets
Taking a look at the company’s long-term goals, KeyCorp remains optimistic that the company will be able to reach all its future targets. Thanks to a strong second quarter of 2022, KeyCorp expects to maintain its moderate risk profile and improve both its productivity and its efficiency, which will almost certainly increase the company’s returns.
Additionally, KeyCorp also consolidated 54 branches in Q2 of 2022 alone, and plan to consolidate an additional 14 in Q3. This increase in consolidations will be a big factor in future cost savings for KeyCorp.
The Impact of COVID-19 on KeyCorp
Like many other financial institutions, the impact of COVID-19 on KeyCorp has been quite significant.
From the increase of volatility and instability in the global market to the reduction of profitability due to decreased interest rates, the true impact of the novel coronavirus on the banking sector likely won’t be known until after the COVID-19 pandemic has subsided for good.
KeyCorp is not immune to this volatility and instability, and it has impacted them greatly — and it’s likely worse than it seems based on the company’s numbers, as well. This plays a major role in the stock price forecast, and probably will for many quarters to come.
It’s simply unavoidable.
KeyCorp’s Influx of New Customers
Despite the financial hardships and the lingering impact of the COVID-19 pandemic on KeyCorp and financial institutions the world over, the company still successfully managed to bring in many new customers during the second quarter of fiscal year 2022.
According to the company’s Q2 earnings for fiscal year 2022, new client growth over the past six months exceeds KeyCorp’s growth in any full-year period over the course of the last decade.
While it might not be apparent yet, this figure will surely factor into future successes for KeyCorp and its quarters to come.
KeyCorp and Laurel Road
Before making a final decision on whether or not KeyCorp stock is a buy or not, it’s worth mentioning KeyCorp’s launch of Laurel Road for Doctors, a suite of digital financial products tailor-made for physicians and dentists to help them manage their medical school debt and balance their financial goals for the future.
This new launch has already made KeyCorp hundreds of millions for the Q2 of 2022 alone, and is likely to increase exponentially in quarters to come.
It’s a smart move on KeyCorp’s part, focusing in on the massive amount of student debt in the healthcare industry, and exactly the kind of thing that can help deliver the company from the financial turmoil that COVID-19 has brought on the banking sector.
The Bottom Line: Is KeyCorp Stock A Buy?
Judging by KeyCorp’s financial, its stock price forecast, its long-term targets, and its many new customers and services, it should now be easier to make a decision about whether or not KeyCorp stock is a buy. I
f there’s one thing that has been made abundantly clear by this information, it’s that COVID-19 has hit the banking sector hard, and no matter how good a financial institution looks on paper, there are factors beyond the control of these companies that can play a direct part in hobbling quarterly results in some way or another.
While KeyCorp’s income is increasing, its dividends are set to increase, its customer base is growing, its quarterly results keep exceeding expectations, and its new financial services seem reasonably successful, there’s still the volatility of the banking sector overall to consider.
As such, KeyCorp stock is not a buy right now, but once things stabilize, it could become a buy in the future.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.