Keeping a Sell on Huntington Bank

We are maintaining our Sell recommendation on Huntington Bancshares, Inc. (HBAN - Analyst Report), as weaknesses in the housing and credit environments continue to impact the company, creating the potential for negative overhangs over the next several quarters. Huntington Bancshares' loan composite remains heavily weighed to the mid-Ohio-to-eastern-Michigan markets, which are under severe stress currently. The company also cut its 2008 outlook.

Considering we are in the initial stages of a housing market correction, delinquencies will continue to rise undoubtedly, which should translate into substantially higher levels of losses throughout 2008 and potentially into 2009. Based on the company's new guidance we are lowering our earnings forecasts to $1.35 per share from $1.40 for 2008 and to $1.50 per share from $1.60 for 2009. We think competitive market conditions, credit quality overhang and rating downgrades by S&P and Fitch will weigh upon its shares for several quarters to come.

HBAN currently trades at 6.4x the consensus forward estimate a 54 percent discount to the peer group median. Relative pricing looks attractive on a P/E-to-growth (PEG) basis, using the consensus forward estimate and the consensus long-term growth rate. Our new six-month target price is $7.50. In addition, the quantitative Zacks Rank for HBAN is currently 3 (up from 4 on April 1, 2008), indicating no clear directional pressure on the shares over the near term.

Read the full analyst report on HBAN