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Compass Point: The Bull Case For Zion Bancorp

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Compass Point analyst Kevin Barker released a note upgrading Zion Bancorporation’s (NASDAQ: ZION) rating from Neutral to Buy and raised the price target from $32 to $33.

Barker said that due to several factors, “the risk-reward of owning ZION prior to a potential equity raise is very attractive. 1) On July 28th we will hear whether the Fed approved the resubmitted plan, which will include some sort of equity capital raise. 2) Zion de-risked their balance sheet by selling $1B of trust preferred CDOs. 3) The market started to price in an equity raise occurring in the new future. 4) Most EPS estimates have taken equity raises into account. 5) The stock is the cheapest regional bank. 6) It is set up as one of the best-positioned banks to take advantage of higher rates. 7) The risk to downside is if the Fed forces Zion to raise more than $400 million or fails the resubmitted plan."

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Barker stated that, “We have a hard time seeing the stock trading below TBV given it currently has a tier 1 common equity ratio of 10.4% per Basel III (estimated).” The firm believes the downside is limited to TBV, which is expected to grow to $27.79 from $25.13.

EPS estimates were raised for 2014 to $1.82 (from $1.65) and 2015 to $1.80 (from $1.84). These estimates include a $400 million equity raise in the fourth quarter.

Zion Bancorporation was recently trading up 1.64 percent at $29.07.

Latest Ratings for ZION

DateFirmActionFromTo
Oct 2014FBR Capital
Oct 2014DA DavidsonReiteratesBuy
Oct 2014FBR CapitalMaintainsMarket Perform

View More Analyst Ratings for ZION
View the Latest Analyst Ratings

Posted-In: Compass Point Kevin BarkerAnalyst Color Upgrades Price Target Analyst Ratings

 

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