Stephens, a financial services firm, increased its price target for Comerica Incorporated (NYSE:CMA) shares to $70.00, up from the previous target of $64.00.
The firm has maintained an Overweight rating on the stock. This decision follows Comerica's third-quarter financial performance, which surpassed expectations. Notably, the company experienced a sequential rise in net interest income and a loan loss provision that was 50% less than projected.
Comerica's management expressed confidence that net interest income (NII) had reached a turning point in the second quarter of 2024 and anticipates continued growth into 2025. The company's balance sheet is positioned to protect profitability even in the face of lower interest rates due to its liability-sensitive stance.
Stephens' revised estimates are based on an expected down-rate deposit beta of 50% by the end of 2025 and minimal loan growth until early 2025. This aligns with Comerica's indications of a decrease in anticipated commercial real estate (CRE) balances.
Furthermore, Comerica has seen an improvement in its adjusted Common Equity Tier 1 (CET1) to Tangible Common Equity (TCE) capital, thanks to lower levels of accumulated other comprehensive income (AOCI).
As a result, the company is planning a $100 million share buyback in the fourth quarter of 2024. Stephens' updated outlook for Comerica also reflects a shift in the potential for mergers and acquisitions activity.
In summary, Stephens has reiterated its Overweight rating on Comerica and adjusted the price target to $70, recognizing the company's robust third-quarter results and its well-positioned balance sheet for future growth.
In other recent news, Comerica Bank has reported third-quarter earnings of $184 million, surpassing expectations. This was driven by robust customer activity, a 1.3% increase in average deposits, and a net interest income of $534 million. The bank's tangible book value grew by 23%, and the CET1 ratio improved to 11.97%.
Comerica's recent performance led to Citi increasing the bank's price target, while Barclays (LON:BARC) and Evercore ISI maintained their respective stances, citing positive expectations for the bank's net interest income.
Despite a projected decline in average loans and deposits for 2024, Comerica anticipates a more robust average loan book and plans to resume share repurchases.
InvestingPro Insights
Comerica's recent performance and Stephens' upgraded outlook are further supported by real-time data and insights from InvestingPro. The company's market capitalization stands at $8.62 billion, with a P/E ratio of 16.17, indicating a relatively modest valuation compared to its earnings. This aligns with Stephens' positive view on the stock.
InvestingPro Tips highlight that Comerica has maintained dividend payments for 54 consecutive years, demonstrating a strong commitment to shareholder returns. This consistent dividend history complements the company's plan for a $100 million share buyback in Q4 2024, as mentioned in the article.
Additionally, Comerica's stock has shown strong momentum, with a 30.43% price total return over the last three months and an impressive 80.75% return over the past year. This performance supports Stephens' decision to raise the price target and maintain an Overweight rating.
It's worth noting that InvestingPro calculates a fair value of $76.89 for Comerica, suggesting potential upside even beyond Stephens' new target of $70. Investors interested in a deeper analysis can access 11 additional InvestingPro Tips for Comerica, providing a more comprehensive view of the company's financial health and market position.
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