On Monday, Baird reduced its price target for Comerica Incorporated (NYSE:CMA) shares to $65 from $68, while reaffirming its Outperform rating on the stock.
The adjustment follows Comerica's second-quarter earnings report, which revealed earnings per share (EPS) of $1.49, surpassing the consensus estimate of $1.19 and Baird's own prediction of $1.30.
Comerica's core pre-provision net revenue (PPNR) trends were noted to be generally better than anticipated, with core revenue decreasing approximately 5% sequentially and core expenses dropping around 1%. Despite these results, the bank's guidance suggested potential PPNR declines due to ongoing deposit pressures and weaker-than-expected loan demand.
The bank's credit trends were highlighted as remaining top-tier, and Comerica is said to possess robust capital, with an excess of approximately 150 basis points over the target. However, the stock experienced a decline of over 10% on Friday following news that Comerica was not selected for the Federal Direct Express contract renewal.
The bank is currently the sole issuer of the Direct Express debit card, serving about 4.5 million federal benefit recipients, a program that is estimated to contribute approximately $3.3 billion in non-interest bearing (NIB) deposits. The anticipated loss of this program in the first half of 2025 is expected to reduce the bank's run-rate EPS by $0.50.
Despite the immediate negative reaction in the stock market, Baird's commentary suggests that Comerica's long-term return profile remains unchanged. The firm advises investors to view the recent price drop as an opportunity to increase their holdings in Comerica, citing the bank's excellent credit profile and its capacity to maintain returns.
In other recent news, Comerica Incorporated has been the focus of several financial reassessments. RBC Capital reduced its price target for Comerica from $58 to $56, while maintaining an Outperform rating, following the company's second-quarter results. These results showed strong fee generation and favorable credit trends, balanced by a decrease in noninterest-bearing deposits and net interest income.
Meanwhile, DA Davidson maintained a Neutral rating with a consistent price target of $55.00, citing the potential loss of the Direct Express Business, which could impact the bank's earnings for 2025.
Truist Securities revised its stance on Comerica, downgrading it from Buy to Hold and adjusting the price target to $53, due to a less favorable outlook for the company's net interest income and fee income for 2025, along with lower loan growth expectations.
On the other hand, Wells Fargo reduced its price target for Comerica shares from $52.00 to $48.00 due to regulatory concerns, while Citi downgraded Comerica's stock from Buy to Neutral, revising its price target to $56.
In addition, Comerica has appointed Floyd Kessler as Executive Vice President, Chief Business Risk and Controls Officer, a move that underscores the importance of regulatory compliance and risk management in the financial services industry. These are among the recent developments that have influenced the company's financial outlook and valuation.
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