Shares of BancorpSouth Inc. fell 2% Monday after the Tupelo, Miss., company was downgraded by a Merrill Lynch analyst.
Merrill's Beth Messmore downgraded the $11.9 billion-asset company's stock to "sell," from "neutral." In an accompanying note, she wrote that she expects continued margin strain at BancorpSouth, and cited pressure on loan and deposit pricing. The company may also experience some outflow of deposits as the recent benefit from Hurricane Rita and Hurricane Katrina normalizes.
The company's shares are up 18% this year, and Ms. Messmore wrote that she anticipates downside risk. She pegged the theoretical fair value for the stock at $23.
BancorpSouth shares closed at $23.77 Monday.
After hearing about the Merrill Lynch downgrade, BancorpSouth executives said they expect the company to continue performing well.
"In spite of a very challenging environment, BancorpSouth produced solid results with both our traditional banking business and our noninterest revenues, contributing significantly to our growth for the quarter," said Randy Burchfiled, a senior vice president at the company. "As a result, we're confident BancorpSouth is well-positioned for the future and for achieving our long-term operating and financial objectives."
BancorpSouth reported last week that its third-quarter earnings went up 34% from a year ago, to $30.6 million, or 38 cents a share.
