The market remains optimistic about Comerica Inc. despite the gloomy quarterly results reported last week by its recently acquired Imperial Bancorp.
Shares of Comerica rose $1.24 or 2.07% Monday, to $61, on a generally positive day for financial stocks as a slew of analysts published favorable research reports. Observers said the Detroit companys management tends to play down expectations and thus has been able to beat estimates with strong growth in its main business, middle-market commercial lending.
Lori Appelbaum, an analyst at Goldman Sachs Group, said the company consistently grows much faster than competitors in both good and difficult economic periods.
In a research note, Ms. Appelbaum wrote that Comerica will probably continue its underperforming, overdelivering patterns and that she would keep the company on her recommended list.
Her per-share earnings target for Comerica this year is $5.15, or 10 cents more than the average estimate of analysts as tracked by First Call/Thomson Financial.
We view the consensus forecast as materially understating the earnings power of the company, Ms. Appelbaum wrote. Comericas management can increase earnings per share by 12%, she wrote.
This is despite the problems at Imperial, the Inglewood, Calif., company that Comerica bought at the end of January. Imperial reported a fourth-quarter loss of $22 million, largely because of Comericas efforts to restructure a balance sheet laden with nonperforming assets.
Imperials fourth-quarter net interest income rose 25% from a year earlier, to $91 million, and fee income fell 74.7%, to $19 million. The ratio of nonperforming assets to total assets nearly doubled, to 1.66%.
Marni Pont ODoherty, who follows regional banks at Keefe, Bruyette & Woods Inc., said she was also upbeat about Comerica, though its net chargeoffs of $105.4 million, a hefty 6.61% of total loans, caught her by surprise. We suspect there was an element of housecleaning involved with this quarters results, she said.
Ms. ODoherty kept her per-share earnings outlook for this year at $5.05. She also maintained her outperform rating for Comerica.
Diana P. Yates, an analyst at A.G. Edwards & Sons, reiterated her accumulate rating.
But Denis Laplante at Fox-Pitt, Kelton said Comerica, which bought Imperial for $1.3 billion, or 2.4 times book value, had overpaid. He also said Comericas shares are undervalued, but he predicted that it would have trouble keeping up with profit expectations. His per-share estimate this year is $5.
Income gains from investment advisory services at Comericas Munder Capital Management have helped the company beat estimates recently, but the current outlook for that business might lead to future disappointment, he said.
At its current valuation, the stock has little upside potential, he wrote, and its earnings growth should be modest compared with other community banks in the region. If the stock price falls back to about $30, investors could find attractive value in it, he wrote.