On Monday, Truist Securities revised its stance on Comerica Incorporated (NYSE:CMA) stock, downgrading it from Buy to Hold and adjusting the price target to $53 from the previous $55.
The reassessment by Truist is based on a less favorable outlook for the company's net interest income (NII) and fee income for the year 2025, along with an expectation of lower loan growth in the second half of 2024 and into 2025.
The downgrade follows a significant 10% drop in Comerica's stock price on Friday. Truist's revised earnings per share (EPS) forecast for Comerica remains unchanged for 2024 at $5.12 but sees a 16% decrease for 2025, bringing the estimate down to $4.76.
The adjustments to the EPS forecast are largely attributed to expectations of a decline in NII and fee income, which are only partially offset by a projected reduction in provisioning in 2024.
Truist's analysis indicates a downward trajectory for Comerica's net interest margin (NIM), influenced by ongoing non-interest bearing (NIB) deposit outflows. The firm anticipates the mix of NIB deposits to decrease to 35% by the end of 2025, a drop from the previously estimated 37%.
Additionally, Truist notes that Comerica's plan to replace approximately $3.3 billion in Direct Express NIB deposits with core customers over the coming years may hinder the bank's ability to reduce deposit costs in a potential Federal Reserve easing cycle.
The firm acknowledges that its rating downgrade is a reaction to the recent sell-off, but also points out a lack of positive fundamental catalysts that would justify a recommendation to buy Comerica shares at the current valuation.
With the stock trading at 10.6 times Truist's projected 2025 EPS, which aligns with the broader KRE index, the firm has opted for a cautious approach, preferring to remain on the sidelines for the time being.
In other recent news, Comerica Incorporated has seen a series of adjustments in its shares' target price by multiple analysts. RBC Capital lowered its price target to $58 from $62, citing a shift towards a higher cost deposit mix and challenges with noninterest bearing balances that led to downward revisions in net interest income expectations. DA Davidson maintained a 'Hold' rating, anticipating a price-to-earnings multiple of 10.0 times their 2025 earnings per share (EPS) forecast of $6.17.
In contrast, 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 from $61. Truist Securities also lowered its price target to $60 from $62, despite a first-quarter earnings beat, and Piper Sandler raised its price target on Comerica shares to $54.00 from $53.00.
In addition to these adjustments, Comerica has appointed Floyd Kessler as Executive Vice President, Chief Business Risk and Controls Officer, bringing 18 years of risk management experience to oversee risk management across Comerica's various revenue divisions. These recent developments underscore the dynamic nature of the banking sector and the importance of regulatory compliance, earnings, and revenue results in shaping analysts' outlooks.
InvestingPro Insights
In light of Truist Securities' recent downgrade of Comerica Incorporated (NYSE:CMA), current market data from InvestingPro provides a broader context into the bank's financial health and stock performance. Comerica's market cap stands at approximately $6.69 billion, with a price-to-earnings (P/E) ratio of 11.16. Notably, the company has maintained dividend payments for an impressive 54 consecutive years, showcasing its commitment to shareholder returns despite recent challenges. As of the latest data, Comerica offers a substantial dividend yield of 5.63%, a figure that income-focused investors may find particularly attractive.
Despite concerns over net income expectations for the year, analysts predict that Comerica will remain profitable, backed by a solid operating income margin of 32.26% over the last twelve months as of Q2 2024. This profitability is further confirmed by the company's basic and diluted EPS from continuing operations, which stand at $4.54 and $4.52 respectively. While the stock has taken a hit with a 10% price total return decrease over the last week, it's worth noting that Comerica's price is at 86.19% of its 52-week high, suggesting potential room for recovery.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available for Comerica, which can be accessed at https://www.investing.com/pro/CMA. These tips provide insights into factors such as earnings revisions and gross profit margins, which can be pivotal in making informed investment decisions. To enhance your InvestingPro experience, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering you even more expert financial analysis and tips.
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