UPDATE: Keefe, Bruyette & Woods Downgrades U.S. Bancorp Due To Valuation Concerns

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Christopher Mutascio of Keefe, Bruyette & Woods downgraded shares of
U.S. Bancorp
USB
on Monday to Underperform from Market Perform with a newly established $44 price target. “We still view the company as a high-quality franchise led by a strong management team,” Mutascio wrote in a note. The analyst adds that shares are now trading at a higher price to earnings multiple than its historical average despite falling EPS estimates as Mutascio's 2015 EPS estimates has fallen over 7 percent since January. Mutascio also notes that the company has seen slower growth from the company's “primary growth engine” (card and payment processing) which has grown at a year-over-year pace of nearly 17 percent before the financial crisis but are now generating only 3 percent year-over-year growth post financial crisis. Mutascio also adds that U.S. Bancorp's leverage to a rising interest rate environment ranks among the bottom third of his large-cap coverage universe. Mutascio states that shares are currently trading above a 13.0x 2016 earnings per share estimate which is “moderately higher' than the company's 22-year average forward price to earnings multiple of 12.2x. The analyst adds that shares are also trading at an “even greater premium” to its forward price to earnings multiple of 11.3x over the past 13 years since the merger between Firstar and U.S. Bancorp.
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Posted In: Analyst ColorDowngradesPrice TargetAnalyst RatingsChristopherfinancial crisisFirstar
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