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Raymond James Downgrades Comerica, Says Q1 Report Not As Good As It Looks

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Raymond James Downgrades Comerica, Says Q1 Report Not As Good As It Looks

Comerica Incorporated (NYSE: CMA) reported first-quarter EPS of $2.11 Tuesday, beating the consensus estimate of $1.93.

The quarter was noisy; the earnings beat came on the back of a negative provision; and the forward estimates have been revised lower, according to Raymond James.

The Analyst

Raymond James’ Michael Rose downgraded Comerica from Strong Buy to Outperform and reduced the price target from $92 to $87.

The Thesis

Excluding a tax benefit from employee stock transactions and the repositioning of a portion of its securities portfolio, the core EPS stands at $2.08, Rose said in a Wednesday note. (See his track record here.)

Although this figure is also higher than the consensus estimate, it was boosted by a negative loan loss provision, lower-than-expected non-interest expenses and modestly higher-than-forecast net interest income, the analyst said. Core fee income was essentially in-line, he said. 

The difference between the loan loss provision forecast of $16 million and the reported negative provision of $13 million equates to around 14 cents in EPS, Rose said. 

During the quarter, Comerica repositioned lower-yielding treasury securities of $1 billion, which resulted in a pre-tax loss of $8 million, according to Raymond James. During the earnings call, the company said this will improve interest income by around $1 million per quarter moving forward.

Period-end deposit growth had a $1.2-billion negative impact from the timing of monthly federal benefit activity in the company’s government prepaid card business, Rose said. 

Comerica expects its net interest income to be flat to slightly better sequentially during the rest of 2019. While the company said some capex from its customers could drive loan growth, it added that they were drawing down on deposits, which will impact loan growth.

Raymond James lowered the EPS estimates for 2019 and 2020 from $8.20 to $8.10 and from $8.55 to $8.35, respectively, to reflect lower net interest income.

Price Action

Comerica shares were down 0.26 percent at $79.18 at the time of publication Wednesday. 

Related Links:

Benzinga's Top Upgrades, Downgrades For April 17, 2019

Comerica Q4 Earnings Outlook

Photo by Dustin Blitchok. 

Latest Ratings for CMA

DateFirmActionFromTo
Apr 2021Raymond JamesMaintainsOutperform
Mar 2021DA DavidsonUpgradesNeutralBuy
Mar 2021Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for CMA
View the Latest Analyst Ratings

 

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