On Friday, Baird increased its price target on Comerica Incorporated (NYSE:CMA) shares to $72 from the previous $68 while maintaining an Outperform rating.
The firm's analysis follows Comerica's first-quarter earnings report, which showed earnings per share (EPS) of $0.98, falling short of the consensus estimate of $1.11 but slightly above Baird's projection of $0.95.
Comerica reported approximately $236 million in fee income, which did not meet the expected $277 million, largely due to a roughly $36 million impact from the benchmark rate BSBY during the quarter. Despite this, Comerica's core pre-provision net revenue (PPNR) trends were consistent with expectations, and the company's credit trends remained clean with capital levels surpassing targets.
Baird's analyst acknowledged the challenges Comerica faces in the current interest rate environment, noting that revenue growth might be constrained. However, the reaffirmation of Comerica's financial guidance suggests a modest PPNR upside compared to the consensus.
The analyst anticipates a potential strong turnaround for Comerica in the second half of 2024 and beyond, citing the roll-off of swaps and securities as a significant factor that could boost the net interest margin (NIM) to potentially over 3.00% in the fourth quarter of 2024, up from around 2.80% in the first quarter.
The firm also highlighted Comerica's effective credit management, particularly within its multi-family portfolio, which benefits from conservative underwriting in economically robust markets with strong employment and population growth.
With a Common Equity Tier 1 (CET1) ratio of approximately 11.47% in the first quarter, Comerica is in a solid position to grow loans when commercial demand picks up. Baird's positive outlook is further supported by Comerica's current trading at approximately 0.85 times its tangible book value excluding other comprehensive income (OCI).
InvestingPro Insights
In light of Baird's recent analysis and price target adjustment for Comerica Incorporated, InvestingPro data provides additional context for investors considering the bank's stock. Currently, Comerica has a market capitalization of $6.71 billion and trades at a price-to-earnings (P/E) ratio of 9.9, reflecting a valuation that is relatively modest in comparison to some industry peers. The adjusted P/E ratio for the last twelve months as of Q1 2024 is slightly lower at 9.76, suggesting a stable earnings valuation over the recent period.
InvestingPro Tips highlight some challenges and opportunities for Comerica. Analysts have revised their earnings downwards for the upcoming period, which could signal caution for near-term growth expectations. However, the company has a longstanding history of dividend reliability, maintaining payments for 54 consecutive years, which may appeal to income-focused investors. Additionally, Comerica has been profitable over the last twelve months, and despite expected net income drops this year, analysts predict profitability will continue.
For investors seeking a comprehensive analysis and additional InvestingPro Tips, they can explore more at InvestingPro's dedicated page for Comerica (https://www.investing.com/pro/CMA). There are several more tips available, providing deeper insights into the company's financial health and market performance. To access these insights, use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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