Is U.S. Bancorp (USB) a Buy in 2026 Amid a Rising Rate-Cut Outlook?

The question of whether U.S. Bancorp (USB) warrants a "buy" designation in 2026 hinges on a nuanced interplay between valutive momentum, analyst consensus, and the evolving macroeconomic landscape. With the Federal Reserve signaling a path of rate cuts in 2026 and analysts offering a mixed but cautiously optimistic outlook, investors must weigh USB's valuation metrics against its strategic adaptability in a shifting interest rate environment.

Analyst Consensus: A Cautious Optimism

The current analyst consensus for USB is "Moderate Buy," with 22 Wall Street analysts contributing to the rating. Of these, 15 have issued "Buy" ratings, while 5 have opted for "Hold," and 1 each for "Sell" and "Strong Buy." This distribution reflects a guarded optimism, particularly given the median price target of $52.00, which implies a 6.9% upside from USB's current price of $48.65. Notably, Oppenheimer's $64.00 price target-a 32% upside-stands out as a bullish outlier, underscoring the potential for significant appreciation if the bank's operational improvements outpace expectations.

The average price target of $52.00 aligns with broader analyst expectations of USB's ability to navigate a rate-cut environment while maintaining profitability. However, the presence of a "Sell" rating highlights lingering concerns about margin compression and macroeconomic headwinds, particularly for institutions with exposure to net interest income (NII).

Valutive Momentum: Undervaluation and Earnings Growth

USB's valuation metrics suggest it is trading at a discount relative to both its peers and intrinsic value estimates. The trailing P/E ratio of 12.4x is below the peer average of 18.9x and the industry average of 11.9x, indicating a relatively attractive entry point. Looking ahead, the forward P/E of 11.92-calculated using 2026 consensus earnings estimates-further reinforces this narrative, particularly as analysts project a 10.05% year-over-year increase in earnings per share (EPS), from $4.38 to $4.82.

The price-to-book (P/B) ratio of 1.50 as of December 2025 also suggests a conservative valuation, especially when compared to the Excess Returns model's intrinsic value estimate of $85.34 per share-a 75% premium to the current price. This discrepancy implies that USB is undervalued by approximately 40.3%, a gap that could narrow if the bank sustains its 12.89% return on equity (ROE) and executes on its capital return strategy.

Rate-Cut Environment: Mixed Impacts and Strategic Adaptability

The anticipated rate cuts in 2026 present both challenges and opportunities for USB. On one hand, lower interest rates could pressure net interest margins, a concern echoed by J.P. Morgan analysts who highlight "muted NII and weaker revenue growth guidance" as risks. On the other, the Federal Reserve's December 2025 rate cut to 3.50%-3.75% and projected additional cuts in 2026 (one by the Fed, two by market expectations) could stimulate economic activity, benefiting USB's commercial and consumer lending segments.

USB has already signaled strategic adaptability by lowering its prime lending rate to 6.75%, a move designed to deepen commercial relationships and grow fee income despite spread compression. Argus Research notes that this approach could offset some margin pressures, particularly in a scenario where rate cuts support business investment and consumer spending. Meanwhile, Morgan Stanley's recent price target increase reflects confidence in USB's cost discipline and operational efficiency, which could insulate it from broader sector headwinds.

Conclusion: A Moderate Buy with Conditional Upside

USB's valuation metrics and analyst consensus position it as a "Moderate Buy" in 2026, but success hinges on its ability to navigate the dual forces of rate cuts and macroeconomic uncertainty. The bank's undervaluation, coupled with a forward-looking P/E that suggests earnings growth, provides a compelling case for long-term investors. However, the risks of sticky inflation-stemming from tariffs and housing costs-and potential margin compression necessitate a cautious approach.

For investors willing to accept moderate risk, USB offers an attractive combination of defensive characteristics (e.g., strong ROE, capital returns) and growth potential in a rate-cut environment. The key will be monitoring the Fed's policy trajectory and USB's execution of its strategic priorities, particularly in commercial banking and cost management.