On Monday, Truist Securities adjusted its price target for Comerica Incorporated (NYSE:CMA) shares, a financial services company, reducing it to $60 from the previous $62, while still holding a Buy rating.
The adjustment follows the release of Comerica's first-quarter results, which exhibited a net interest income (NII) and earnings per share (EPS) that surpassed expectations.
The revised earnings per share forecast for 2024 and 2025 now stands at $5.07 and $6.40, respectively, down from the earlier projections of $5.16 and $6.34. The change in estimates is largely attributed to an anticipated higher net interest margin (NIM), which is slightly offset by a predicted decrease in fee income and an increase in operating expenses for 2024.
Truist Securities anticipates a stronger trajectory for NII/NIM, driven by an unexpected rise in deposit growth during the first quarter. The firm expects the cumulative interest-bearing deposit beta to hit 63% by the fourth quarter of 2024, ahead of potential rate cuts by the Federal Reserve in 2025. This is an increase from the previously forecasted 61% in the third quarter.
The analysis by Truist Securities suggests that the NIM could reach its lowest point at 2.89%, with NII at $537 million in the second quarter of 2024, before experiencing sequential growth through the fourth quarter of 2025. Additionally, the firm's projection of a 5% loan growth by the end of 2025 may be on the conservative side, considering management's indications of an acceleration in the second half of 2024.
Based on these projections, Truist Securities believes that Comerica's stock remains an attractive investment, trading at 8.1 times the firm's estimated EPS for 2025. The revised price target of $60 reflects a 9.3 times multiple of the estimated EPS for 2025, slightly lower than the previous target.
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