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Comerica Displays Organic Growth: Should You Hold the Stock?

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Comerica Incorporated (CMA - Free Report) can be a solid bet now on the back of its focus on revenue-enhancing initiatives which will likely drive operational efficiency. Further, the company is expected to benefit from a strong capital position, easing margin pressure and loan growth in the near term.

Growth in Efficiency and Revenue Initiative or “GEAR Up” initiatives, rising rates, steady fee income and robust capital-deployment activities continue to drive Comerica’s performance. However, escalating expenses on technological developments remain concerns.

The company recorded a gain 4.8% over the past six months compared with 5.3% decline recorded by the industry.



Further, the company’s earnings estimates moved around 1% upward, for the current year, over the past 30 days. As a result, the stock carries a Zacks Rank #3 (Hold).

In mid-2016, Comerica launched “GEAR Up” initiatives in order to drive revenue growth, and reduce expenses by identifying and analyzing areas with room for improvement. Notably, execution of these initiatives resulted in increased pre-tax income of 25% in first-quarter 2018. Further, such initiatives are anticipated to deliver annual pre-tax income of about $270 million by year-end 2018, and additional benefits in pre-tax income of $35 million in 2019 and beyond.

Moreover, the company remains well poised to benefit from the rising rate environment. The consistently increasing loans balance over the past years has supported margin expansion to an extent. Management expects average loan growth to be in line with Gross Domestic Product growth in 2018.

Comerica continues to enhance shareholders’ value through steady capital-deployment activities. The successful clearance of the Fed stress test in 2018 indicates that Comerica is well positioned to weather any severe economic downturn. Furthermore, it awaits regulatory approvals for rewarding shareholders with dividends or potential share buybacks under the 2018 capital plan.

However, volatile non-interest expenses remain a concern. Additionally, management expects expenses to flare up 1% in 2018, as it continues to invest in technological developments. Furthermore, Comerica’s significant exposure to commercial loans (nearly 63% of the total loans) keeps us apprehensive.

Stocks to Consider

Cullen/Frost Bankers, Inc. (CFR - Free Report) has been witnessing upward estimate revisions for the last 30 days. Additionally, the stock has jumped more than 15% in the past year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Old Second Bancorp, Inc. (OSBC - Free Report) has been witnessing upward estimate revisions for the last 90 days. Also, the company’s shares have risen nearly 30.9% over the past year. It holds a Zacks Rank #2, at present.

M&T Bank Corporation (MTB - Free Report) has been witnessing upward estimate revisions for the last 30 days. In a year’s time, this Zacks #2 Ranked company’s share price has rallied more than 4.5%.

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