On April 6, we published an updated research report on Comerica Incorporated CMA. The company continues to benefit from initiatives to increase revenues and controlled spending, while the lack of diversification of the loan portfolio and significant exposure to some tough economies remain headwinds in the near term.
Zacks’ consensus estimate for the company’s earnings for the current year has been revised up 1.9% in the past 30 days. The action is currently ranked Zacks # 3 (Hold).
Comerica shares have jumped 69.7% in the past six months, topping the industryrally of 53.9%.
Having experienced continuous organic growth over the past several years, the company also remains focused on achieving robust revenue growth rates in the days to come. Given the company’s competence in implementing strategic initiatives, it has the potential to generate solid revenue. In addition, in a gradually recovering economy, the company’s loan balances are expected to improve, leading to growth in net interest income.
Despite continued investments in technology and other expenses, Comerica’s non-interest expense recorded a negative 1.9% CAGR over five years (end of 2020) due to GEAR Up initiatives. These controlled expenses will likely contribute to the expansion of the bottom line. In addition, management anticipates lower expenses in the first quarter of 2021, due to a likely decrease in deferred compensation and pension costs, seasonal reduction in occupancy, staff insurance and advertising. .
However, Comerica still derives a significant portion of its total revenues from California and Michigan, where the economic environment has remained increasingly difficult in recent years. Although the environment has seen some visible improvements, any major turnaround remains ambiguous, thus preventing considerable income generation in these regions.
In addition, a large portion of Comerica’s loan portfolio – nearly 81% as of December 31, 2020 – includes commercial and commercial mortgages. Such a lack of diversification can be precarious for the company in a difficult economic context.
Stocks to consider
Top-ranked stocks in the financial space include Summit Financial Group, Inc. SMMF and United Bankshares, Inc. UBSI, who currently carries a Zacks # 2 (Buy) rank, while Fifth third Bancorp FITB currently has a Zacks rank of # 1 (strong buy). You can see The full list of current Zacks # 1 Rank stocks here.
Summit Financial has seen a 3.4% upward revision to earnings estimates for the current year over the past 30 days. In addition, its shares have gained 59.3% in the past six months.
United Bankshares’ profit estimate for the current year has been revised up 3.4% in the past 30 days. In addition, its shares have jumped 58.8% in six months.
Fifth Third Bancorp’s profit estimate for the current year has shifted 5.6% north in 30 days. In addition, its share price rose 64.4% in six months.
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