D.A. Davidson on Thursday cut its rating on financial-services firm Comerica Inc. to neutral from buy, while Citigroup reiterated a buy rating and said the stock’s drop on its results may be overblown.
Both analysts, however, reduced their 2022 earnings targets for Comerica CMA, -0.98%, which is a component of the S&P 500 SPX, +0.86%.
D.A. Davidson’s Peter Winter said one key factor in his downgrade is that Comerica’s net interest income may peak in the fourth quarter, with some downside risk.
He also cited deposit outflows that are “more than expected and will likely continue.”
Winter reduced his fourth-quarter earnings estimate for Comerica to $2.72 a share from $2.86 a share and also cut his price target on the stock to $78 a share from $95 a share.
Citi analyst Keith Horowitz reiterated a buy rating and said the 9% drop in Comerica stock on Wednesday was driven by commentary from the company that net interest income may be pressured in the fourth quarter, as well as by jitters around a 25% hit in its tangible book value on reduced contributions from its other comprehensive income (OCI).
“Our view is 1) 2023 earnings and net interest income outlook is roughly consistent with consensus prior to the 3Q release and 2) looking at tangible book value in isolation is fundamentally flawed,” Horowitz said in a research note.
Horowitz said he focuses more on Tier 1 common equity regulatory capital for Comerica; that figure increased 4% in the third quarter over the previous quarter.
The stock offers a “compelling value,” Horowitz said, reiterating a price target of $90 a share. He cut his 2022 earnings target for Comerica by 25 cents to $8.50 a share and his 2023 view by 20 cents a share to $10.15 a share, while raising his 2024 estimate for the company by 50 cents to $11.10 a share.
Meanwhile, Truist Securities analyst Jennifer H. Demba also reiterated a buy rating on Comerica while cutting her 2022 earnings estimate for the company to $8.54 a share from $8.71 a share.
“While most of the net interest margin upside may have been realized, there is more support from its very large non-interest bearing (NBI) deposit base and liquid balance sheet,” Demba said. She said the company remains well positioned when rates reverse course and move down.
Shares of Comerica fell 0.4% on Thursday, after sliding 9% in regular trading on Wednesday.