Market Overview

SunTrust's Stock 'Disconnected From Strong Fundamentals,' Argus Says

SunTrust's Stock 'Disconnected From Strong Fundamentals,' Argus Says
Related STI
A Peek Into The Markets: US Stock Futures Up Ahead Of Procter & Gamble Earnings
Earnings Scheduled For October 19, 2018

Shares of SunTrust Banks, Inc. (NYSE: STI) have underperformed its regional bank peers over the past six months, but the recent stress test report makes it clear the stock is "disconnected from strong fundamentals," according to Argus.

The Analyst

Argus Research Company's Stephen Biggar upgraded SunTrust Banks from Hold to Buy with a new $75 price target.

The Thesis

SunTrust's main takeaway from the recent Federal Reserve stress test includes a better than expected capital return program, Biggar said in a note. Specifically, the company lifted its share buyback plan authorization by 52 percent to $2 billion. This should now lower the total share count by 4 percent, which is better than prior expectations of a 3 percent reduction.

The company also lifted its quarterly dividend by 25 percent to 50 cents a share, which would improve the dividend yield on the stock from 2.4 percent to 3 percent.

Meanwhile, SunTrust's stock is trading at 12.5 times Argus' estimated 2018 EPS, which is below the industry average. The stock typically trades at a premium to its regional bank peers and this disconnect should reverse as investors appreciate the improved capital return plans. The firm's $75 price target implies the stock trades at 14 times 2018 estimated EPS.

Price Action

Shares of SunTrust Banks were trading around $66.66 at time of publication.

Related Links:

Fed Stress Test Shows Wells Fargo's Main Overhang Is Gone, Morgan Stanley Says In Upgrade

What's The Volcker Rule, And Why Are Banks Celebrating The Fed's Proposed Changes?

Latest Ratings for STI

Oct 2018BMO CapitalMaintainsMarket PerformMarket Perform
Oct 2018B. Riley FBRMaintainsBuyBuy
Sep 2018PiperJaffrayDowngradesOverweightNeutral

View More Analyst Ratings for STI
View the Latest Analyst Ratings

Posted-In: Argus Research Company banks regional banks Stephen BiggarAnalyst Color Upgrades Federal Reserve Analyst Ratings Best of Benzinga


Related Articles (STI)

View Comments and Join the Discussion!

Latest Ratings

BKNGWells FargoUpgrades0.0
DARJP MorganUpgrades25.0
HPCredit SuisseUpgrades65.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Mid-Afternoon Market Update: Dow Down Over 150 Points; Radisys Shares Spike Higher

The Week Ahead: Tariffs Dominate The Headlines In Slow Market Week