Origin Bancorp's Q2 Earnings and Hedge Fund Positioning Signal Near-Term Upside

As Origin Bancorp (NYSE: OBK) prepares to report Q2 2025 earnings on July 23, investors are watching closely for signs of sustained momentum. The company's first-quarter performance, strategic initiatives, and shifting hedge fund positioning suggest a compelling catalyst for near-term price appreciation. Here's why investors should take notice.

Q1 Results Set the Stage for Strong Q2 Expectations

Origin Bancorp delivered an impressive Q1 2025, with diluted EPS jumping to $0.71 from $0.46 in the prior quarter—a 54% increase. Net income surged 57% to $22.4 million, driven by an expanded net interest margin (NIM) of 3.44%, up 11 basis points from Q4 2024. This margin improvement came from deposit rate reductions and bond portfolio optimization, underscoring management's ability to navigate rising interest rate environments.

The company's “Optimize Origin” plan, targeting a 1% return on average assets (ROAA) by Q4 2025, is already yielding results. Through branch consolidations and cost-cutting, pre-tax pre-provision earnings are set to improve by $23.4 million annually. With Q2 estimates at a consensus of $0.78 EPS (vs. $0.71 in Q1), the path to hitting full-year targets of $3.19 EPS appears achievable.

Hedge Fund Activity: A Mixed Picture with Bullish Undercurrents

Institutional ownership data reveals a tug-of-war among investors, but the net result is a bullish tilt. Notably:
- Basswood Capital increased its stake by 688.9% to $13.25 million, signaling aggressive optimism.
- Hotchkis & Wiley and Kennedy Capital also added significant holdings, while Endeavour Capital exited entirely.
- T. Rowe Price, a long-term holder, reduced its position by 20.7%, possibly reflecting sector rotation or near-term caution.

The net effect? 54.68% institutional ownership remains solid, and the influx from activist funds like Basswood suggests a belief that Origin's operational improvements will translate to valuation upgrades. For retail investors, this activity often precedes volatility around earnings—especially if the stock breaks above resistance levels.

Analyst Consensus: A Strong Buy with Upside Catalysts

Analysts are overwhelmingly bullish. The consensus “Buy” rating (5 analysts, 0 “Sells”) has an average price target of $42.20, with Stephens & Co. at $45.00 and Keefe, Bruyette & Woods at $41.00. The recent Zacks Rank #2 (Buy) upgrade on July 3 highlights upward revisions in earnings estimates, a key driver of institutional buying.

What's fueling this optimism?
1. Margin Expansion: The NIM-FTE's 3.44% in Q1 is higher than peers, and management aims to sustain this through 2025.
2. Cost Cuts: Branch closures and headcount reductions are on track to save $23.4 million annually, boosting ROAA.
3. Dividend Growth: The $0.15 quarterly dividend (1.63% yield) offers stability amid volatile markets.

Risks and Considerations

The technical picture isn't all rosy. Spark's AI analysis notes a “Strong Buy” sentiment but warns of risks like rising non-performing loans (NPLs) and broader economic uncertainty. Origin's beta of 0.83 suggests lower volatility than the market, but a miss on NIM or loan growth could spook investors.

Investment Thesis: Buy Ahead of Earnings, Monitor NIM and ROAA

With Q2 EPS estimates at $0.78 and a consensus 12-month target of $42.20, there's 9.0% upside from current prices (~$37.62). Investors should consider:
- Buying ahead of earnings: Analyst upgrades and hedge fund accumulation often precede post-earnings rallies.
- Watching NIM and ROAA guidance: These metrics will determine whether the stock can sustain momentum beyond Q2.
- Dollar-cost averaging: Given the beta of 0.83, the stock may offer less volatility than high-beta peers, making it a safer growth play.

Conclusion

Origin Bancorp's combination of strong Q1 results, strategic execution, and institutional support makes it a compelling near-term trade. While risks like NPLs linger, the catalyst-rich environment—coupled with a $42.20 price target consensus—suggests investors should position for upside ahead of the July 23 earnings report. This could be a rare “win-win”: a bank stock with growth metrics, a dividend, and activist backing in a sector that's often overlooked.

Final Call: Buy OBK with a $40 target, aiming for a 10% return by Q3.