Jefferies has revised down its price target on Prosperity Bancshares (NYSE:PB) to $85.00 from $90.00, maintaining a Buy rating on the regional bank. The firm’s action comes after Prosperity announced a planned acquisition of Stellar Bancorp, a transaction Jefferies sees as strategically strengthening Prosperity’s presence in Texas and expanding its deposit base.
At the time of the analyst update, Prosperity was trading at $67.11 and carried a price-to-earnings ratio of 12.08. Jefferies noted those metrics in its assessment and referenced InvestingPro Fair Value estimates that imply the stock may be undervalued at current market levels.
Jefferies described a mixed outlook on the Stellar deal. On the positive side, the firm expects the acquisition to lift Prosperity’s return on tangible common equity (ROTCE) over time, and it highlighted an anticipated 9% accretion to earnings per share as a meaningful, if partial, offset to valuation concerns.
However, the analysis also underscored several reservations. The transaction carries a 7.8% dilution to tangible book value and an earnback period of 4.5 years, a timeframe Jefferies characterizes as longer than typical for comparable bank acquisitions. Those two metrics factor into the firm’s decision to trim its price objective despite the maintained Buy rating.
Valuation multiples were another focal point. Jefferies observed a price-to-tangible book value (P/TBV) multiple of 1.8x for the deal. While the firm judges that 1.8x to be reasonable against other transactions in the market, it also noted that the multiple appears rich when weighed against Stellar’s reported 9% ROTCE.
Separately, Prosperity released fourth-quarter 2025 results that presented a mixed financial picture. The bank reported earnings per share of $1.49, topping analysts’ expectations of $1.42. Revenue for the quarter came in at $317.73 million, narrowly missing the consensus estimate of $317.9 million. Those results translate into an earnings beat alongside a slight revenue shortfall.
Market reaction to the quarterly release included a decline in Prosperity’s share price, which analysts attributed to investor concerns about the bank’s growth outlook and strategic execution. Jefferies and other market participants are watching the post-deal integration and the company’s ability to convert projected benefits into durable improvements in profitability.
Investors and stakeholders will be monitoring whether the expected EPS accretion materializes and how quickly any tangible book dilution is recovered, given the longer earnback horizon noted by Jefferies. These outcomes will be central to assessing the longer-term impact of the Stellar acquisition on Prosperity’s financial profile.
What to watch next
- Execution of the Stellar acquisition and integration milestones.
- Quarterly performance updates that shed light on ROTCE trends and tangible book value trajectory.
- Market reaction to any revised guidance or commentary from management regarding deposit growth and cost synergies.