UPDATE: Compass Point Upgrades BB&T Corporation to Buy, Raises PT on Expected Outperformance

In a report published Tuesday, Compass Point analyst Kevin Barker upgraded the rating on BB&T Corporation

from Neutral to Buy, and raised the price target from $34.00 to $38.00. In the report, Barket noted, “Over the past year, BBT has drastically underperformed the regional bank peer group because the company showed it had outsized exposure to lower interest rates, primarily due to the run-off of the Colonial portfolio. Also, the bank has not shown as robust loan growth as some of its peers and it was the only regional bank to have their capital plan denied by the Fed as part of CCAR. We believe the stock is set to outperform on a relative basis (especially if we see a material correction in financials) for the following reason. First, this set of bad news has effectively been priced in as the stock is now trading at 9.9x FY14E EPS, compared to the regional bank peer group at 11.2x EPS, even though it has historically traded at a premium to the peer group (regional banks with more than $50B in assets). Second, we could hear further details about a re-submitted capital plan to the Fed as part of CCAR. We see this as either a neutral or positive event for the company given investors have little expectation for capital return to shareholders. Third, the company has a long history of successfully making accretive acquisitions, which could provide upside to earnings. Finally, the company has been careful not to over-extend itself on commercial lending in the face of intense pricing competition and could be well-positioned for a resurgence in residential lending. Our new $38 price target is equal to 12.4x FY14E EPS.” BB&T Corporation closed on Monday at $30.38.