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Bull of the Day: Comerica (CMA)

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Comerica Inc. (CMA - Free Report) is growing earnings as the interest rates rise. This Zacks Rank #1 (Strong Buy) recently surprised on the Zacks Consensus by 15%.

Comerica is regional bank headquartered in Dallas, Texas with locations in Texas, Arizona, California, Florida and Michigan. With a market cap of $16.4 billion, it has three major business segments including The Business Bank, the Retail Bank and Wealth Management.

Big Beat in the Second Quarter

On July 17, Comerica reported its second quarter results and blew by the Zacks Consensus by 25 cents. Earnings were $1.87 versus the consensus of $1.62.

Earnings rose 18% quarter over quarter thanks to loan growth and favorable credit metrics, combined with higher fee income.

Credit quality, always a concern with banks, especially given the length of this recovery, remains strong. Gross charge-offs of $20 million were more than offset by recoveries.

It also had a broad-based decline in problem loans. Criticized loans fell $355 million, or 17%, and are now less than 4% of total loans as of the end of the second quarter.

Returning More to the Shareholders

The Federal Reserve recently announced that Comerica was no longer subject to certain regulations and reporting requirements left over from the Great Recession crisis.

The Board is meeting on July 24 to determine its actions to increase returns to shareholders.

It was already doing so, even with the restrictions. As of June 30, it had returned $227 million to shareholders in the form of dividends and stock repurchases.

Will it increase this amount?

Comerica also recently increased the dividend 13% to $0.34 per share, which is currently yielding 1.5%.

Stay tuned.

Earnings Estimates Jump

After the big beat, the analysts scrambled to raise their 2018, as well as their 2019, earnings estimates.

13 estimates were raised for 2018 in the last week, pushing the Zacks Consensus Estimate up to $6.98 from $6.73.

That's earnings growth of 47.3% compared to 2017 when Comerica made just $4.74.

They're also bullish on 2019 as 10 raised estimates there as well, pushing the Zacks Consensus up to $7.82 from $7.66. That's another 11.9% earnings growth.

A Buying Opportunity?

After a big run in 2017, Comerica shares, like many of the banks, have been stalled in 2018.

Yet, they're also pretty cheap.

Comerica trades with a forward P/E of just 13.2 and you get the dividend.

With interest rates expected to continue rising in the second half of 2018, this regional bank is one that should be on your investing short list.

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