) have recorded a solid year-to-date return of 46.4%. Impressive
organic growth, strong capital deployment activities and
continuous improvement in credit quality were the driving factors
behind this growth story.
However, we are not confident that these factors will further
strengthen down the road as there will be considerable pressure
on its bottom line owing to the sluggish economic recovery and
stringent regulatory requirements.
After analyzing the company's fundamentals following the
third-quarter 2013 earnings release, we would suggest to stay
invested in it. However, adding fresh shares of Comerica to your
investment portfolio may not be a good idea given the expected
Why This Stance?
Comerica's third-quarter 2013 earnings per share of 78 cents beat
the Zacks Consensus Estimate by 7 cents. Also, earnings came in 2
cents higher than the prior-quarter earnings.
Better-than-expected results were driven by higher non-interest
income and lower non interest expense, partly offset by a fall in
net interest income. Moreover, capital ratios and credit quality
were impressive and reflected the company's financial strength.
Comerica's capital deployment activities reflect its efforts
towards enhancing shareholder value. Apart from the regular
payment of quarterly cash dividend, the company has an effective
share repurchase program in place. Notably, for the quarter ended
Sep 30, 2013 the share repurchases, combined with dividends
resulted in a total payout of about 70% of net income to
However, Comerica's bottom-line growth is expected to be sluggish
in the next few quarters. Increasing competition has lead to a
shift in the portfolio mix towards lower yielding loans and lower
reinvestment rates for the securities portfolio, thereby
affecting net interest margin. Moreover, loan growth is expected
to be modest reflecting lower demand due to the economic
The company has seen a mixed track record when it comes to
estimate revisions and the Zacks Consensus Estimate has not been
in trend either. As a result, the company currently carries a
Zacks Rank #3 (Hold). Over the last 30 days, the Zacks Consensus
Estimate for 2013 remained stable at $2.97 per share, while for
2014, it declined nearly 1% to $2.93 per share.
Other Stocks to Consider
If you are interested in the banking sector, you may consider a
few better-ranked stocks like
First Interstate Bancsystem Inc.
German American Bancorp Inc.
Mainsource Financial Group
). All these stocks carry a Zacks Rank #1 (Strong Buy).
COMERICA INC (CMA): Free Stock Analysis
FIRST INTST MT (FIBK): Free Stock Analysis
GERMAN AMER BCP (GABC): Free Stock Analysis
MAINSOURCE FINL (MSFG): Free Stock Analysis
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