UPDATE: Compass Point Upgrades EverBank Financial Corp. to Neutral, Reiterates $14 PT Following 3Q13 Earnings Release

In a report published Monday, Compass Point analyst Kevin Barker upgraded the rating on

from Sell to Neutral, and reiterated the $14.00 price target. In the report, Compass Point noted, “We are upgrading EVER to Neutral from Sell and maintaining our $14 price target following the 3Q13 earnings release. The core operating result was lower than expected, however the company is taking action to better align itself with the current environment with the sale of MSRs, payoff of wholesale borrowings, and exit from wholesale originations. The company announced that it sold/transferred servicing rights to Walter Investment (WAC - Neutral, $43 PT) related to a $20.3B portfolio, which is expected to be accretive by approximately $20-25M (or $0.16-0.20/share). With that being said, we believe management is taking the right steps for the long-term by moving toward a more traditional commercial banking model, which should result in more consistent earnings and eventually, a higher valuation multiple. We are adjusting our FY13 operating EPS estimate to $1.13 from $1.20 and our FY14 estimate to $1.12 from $1.25. Furthermore, we are issuing our FY15 estimate of $1.25. Despite our lower estimates, we maintain our $14 price target due the higher amount of excess capital that could be used for an accretive acquisitions or the implementation of buybacks. Proforma of the MSR sale, the company stated that they expect their tier 1 common ratio to be approximately 10.5% (compared to the 9.5-10% range in 3Q13, per Basel III), well above the 8% minimum. Therefore, we believe the risk to the downside are limited, especially with our estimate for 4Q14 TBV being $12.53.” EverBank Financial Corp. closed on Friday at $14.76.