Union Planters Corp. has long been one of the toughest companies for Wall Street to figure out.
The Memphis banking company has been snapping up banks all over the map, from Tennessee to Miami to Decatur, Ill. It closed 12 deals in the third quarter alone, and in four years its asset size has soared to $30.5 billion, from $6.7 billion.
Bigger size has brought benefits. Union Planters' stock price jumped to $51 on news that it would succeed NationsBank Corp. on the S&P 500 stock index in late September. But its shares have since slipped back to the $48 range. That may be a sign of how hard investors find it to evaluate this fast-growing company, whose earnings reports have long been characterized by nonrecurring charges and other merger-related items.
But with the company taking a breather from dealmaking, investor sentiment may be changing.
Monday, Merrill Lynch & Co. bank analyst William Katz issued a report rating the company's stock a new "accumulate." He estimated its price would reach $57 a share in the next 12 months, an 18% increase from the current level. Union Planters closed up 75 cents Monday, at $48.75, in line with the rest of the market.
"There was criticism that there were too many moving parts to the company," said Frank M. Conner 3d, a banking lawyer in the Washington firm of Alston & Bird who has advised Union Planters on many deals. "But now it's all coming together for them."
It's not clear this is a majority view, however.
Keefe, Bruyette & Woods Inc. analyst Joseph Roberto last month downgraded Union Planters shares to "market perform" from "attractive" because he thinks the stock will rise less than other bank stocks, and he also cut his 1999 earnings estimates. "The third-quarter numbers were very muddy," he said. "It may not be until next March or June that we know what the underlying trends are."
That assumes Union Planters abjures more deals-an unlikely scenario under chairman Benjamin W. Rawlins Jr.
Mr. Rawlins has built the company in virtual anonymity since rescuing it from serious financial trouble in 1984. He built the company through buying dozens of small banks and thrifts in the South and gutting their costs. This year he cut his biggest deal ever, paying $2.2 billion for Magna Group, a $7.7 billion-asset St. Louis banking company. The purchase added significant midwestern business, which Union Planters has enhanced by acquiring Indiana branches from Bank One Corp.
Acquisitions are as much a business line at Union Planters as at First Union Corp. or Bank One, say company observers, who also think plenty of small and midsize banks would love to sell to Union Planters.
But many analysts are still waiting to see whether "big" means "good" in the case of the Memphis company.
Mr. Roberto is one of many taking a wait-and-see attitude. Fourth- quarter earnings should be "relatively less noisy" than in previous reports, he said. Sometime next year, he said, investors should be able to judge better what Mr. Rawlins has built.
