Back to top

Analyst Blog

Shares of Comerica Incorporated (CMA - Analyst Report) have recorded a solid year-to-date return of 46.4%. Impressive organic growth, strong capital deployment activities and continuous improvement in credit quality were the driving factors behind this growth story.

However, we are not confident that these factors will further strengthen down the road as there will be considerable pressure on its bottom line owing to the sluggish economic recovery and stringent regulatory requirements.

After analyzing the company’s fundamentals following the third-quarter 2013 earnings release, we would suggest to stay invested in it. However, adding fresh shares of Comerica to your investment portfolio may not be a good idea given the expected headwinds.  

Why This Stance?

Comerica’s third-quarter 2013 earnings per share of 78 cents beat the Zacks Consensus Estimate by 7 cents. Also, earnings came in 2 cents higher than the prior-quarter earnings.

Better-than-expected results were driven by higher non-interest income and lower non interest expense, partly offset by a fall in net interest income. Moreover, capital ratios and credit quality were impressive and reflected the company’s financial strength.

Comerica’s capital deployment activities reflect its efforts towards enhancing shareholder value. Apart from the regular payment of quarterly cash dividend, the company has an effective share repurchase program in place. Notably, for the quarter ended Sep 30, 2013 the share repurchases, combined with dividends resulted in a total payout of about 70% of net income to shareholders.

However, Comerica’s bottom-line growth is expected to be sluggish in the next few quarters. Increasing competition has lead to a shift in the portfolio mix towards lower yielding loans and lower reinvestment rates for the securities portfolio, thereby affecting net interest margin. Moreover, loan growth is expected to be modest reflecting lower demand due to the economic uncertainty.

The company has seen a mixed track record when it comes to estimate revisions and the Zacks Consensus Estimate has not been in trend either. As a result, the company currently carries a Zacks Rank #3 (Hold). Over the last 30 days, the Zacks Consensus Estimate for 2013 remained stable at $2.97 per share, while for 2014, it declined nearly 1% to $2.93 per share.

Other Stocks to Consider

If you are interested in the banking sector, you may consider a few better-ranked stocks like First Interstate Bancsystem Inc. (FIBK - Snapshot Report), German American Bancorp Inc. (GABC - Snapshot Report) and Mainsource Financial Group (MSFG - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%