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Analyst Blog

On Mar 4, 2014, we issued an updated research report on Comerica Incorporated (CMA - Analyst Report). The company reported impressive fourth-quarter 2013 results in January. With the rise in revenues, on the whole, the credit quality also improved. Alongside, the company hiked its common stock quarterly dividend. Yet, a low interest-rate environment and regulatory issues along with litigation risks remain concerns.

Comerica posted operating earnings of 77 cents per share that outpaced the Zacks Consensus Estimate of 74 cents. Including litigation-related expenses of $52 million, net income came in at 62 cents per share. Notably, the company has outpaced the Zacks Consensus Estimate in all the four quarters of 2013, with an average beat of 6.74%.

In 2013, the company repurchased shares worth $287 million and declared $126 million as common stock dividends resulting in a total payout of about 76% of net income to shareholders. Further in Jan 2014, Comerica’s board of directors announced a 12% hike in the quarterly common stock dividend. Such a shareholder-friendly approach is expected to act as a catalyst for the stock.

However, with increasing competition, shift in the portfolio mix towards lower yielding loans as well as lower reinvestment rates for the securities portfolio, net interest margin is likely to continue to be pressurized in the quarters ahead. Notably, in 2013, net interest margin declined to 2.84% from 3.03% in 2012.

Over the last 60 days, the Zacks Consensus Estimate has increased 3.1% to $3.02 for 2014, while it decreased slightly to $3.25 per share for 2015. Hence, Comerica currently carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Some better ranked stocks worth considering include The Goldman Sachs Group, Inc. (GS - Analyst Report), Fifth Third Bancorp (FITB - Analyst Report) and The PNC Financial Services Group, Inc. (PNC - Analyst Report). All 3 carry a Zacks Rank #2 (Buy).

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