Over the last few years I have noticed BB&T stock has been downgraded right after a very good earnings report is released. The announcement just made resulted in at least two downgrades.
Anyone care to comment on this??????
They were right weren't they...stock price is essentially flat for the past 3 years.....where is the growth to come from?
Plus downgrade is not, and has not been to sell or hold...just market perform...ie a little better than dead money...of course...I would be thrilled to be even for the past 3 years!
This will NOT be a good year for BBT. All that they have been sweeping under the rug will have to finally be dealt with.
#1. Highest debt to equity ratio in their peer group.
#2. $2.5 billion that needs to be spent on technology improvements.
You may find this interesting from American Banker:
4Q Earnings: BB&T Chief: '03 Target May Still Be Too High
Says he's counting on a rate hike; some don't see it coming
American Banker Tuesday, January 14, 2003
By David Boraks
Predicting earnings is as much art as science, but the sluggish economy and the uncertain business climate are forcing bank executives to constantly rethink assumptions and, more often than not, scale back projections - that is, if they offer any.
BB&T Corp. chief executive John Allison found himself in that position Monday as he endorsed analysts' lowered estimates for 2003 profits and warned that even those could be jeopardized if the economy fails to improve in the second half.
In a conference call with analysts, Mr. Allison said he empathized with top managers at other banks who have decided not to give earnings guidance this quarter, though he declined to join them. Executives at SunTrust Banks Inc. of Atlanta disappointed some analysts last week by refusing to discuss Wall Street's 2003 estimates.
Mr. Allison said he thinks "it's part of our job" to offer earnings guidance. "On the other hand, we could be wrong. All we can do is give you our honest thoughts, knowing that at the end of the day our honest thoughts could be wrong."
In October, Mr. Allison said he was comfortable with analysts' 2003 profit projections of between $3 and $3.10 a share. But that was before the Federal Reserve cut interest rates by one-half percentage point, and many still held out hope that a recovery was imminent.
Analysts have since trimmed their estimates for BB&T to a range of $2.95 to $3.05 a share, or a consensus of $2.99, according to Thomson First Call. Mr. Allison called both the range and the consensus "reasonable" but said whether BB&T hits the target will depend on how the economy performs in the second half. He also said the company is counting on the Fed to raise interest rates by 100 basis points between August and December.
Mr. Allison's comments came after BB&T issued a fourth-quarter earnings report Monday that drew mixed reviews from analysts. The Winston-Salem, N.C., company said net income rose 21%, to $337 million, from the year earlier on a surge in fees from mortgage banking, insurance, and other businesses. Earnings per share were 70 cents.
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BB&T had merger charges of $6.5 million, or 2 cents a share, in the last quarter of 2002. Excluding the charges, operating earnings were 72 cents a share, or a penny better than the Wall Street consensus.
The report, and Mr. Allison's comments, left some analysts skeptical about BB&T's prospects for 2003.
Gerry Cronin of Sandler O'Neill & Partners LLP cut his rating on BB&T's stock Monday afternoon to "maintain" from "buy." He said loan growth, especially that of commercial loans, is likely to remain weak, and he expects the cost of bad loans to remain high.
Christopher Marinac, an analyst at SunTrust Robinson Humphrey, said even BB&T's lowered projections may be optimistic. He said he is one of those who believe the Fed is "is going to be sure that the economy is up and running before it gets worried about inflation" and decides to raise rates.
BB&T got help during the fourth quarter from $20 million in one-time gains, including $14 million from changing the way it accounts for mortgage revenues and $4 million it recaptured from a previous charge to reduce the value of mortgage servicing rights. But company executives argued that those gains were offset by a decision to boost loan-loss reserves by $16 million. BB&T wrote off $69 million in bad loans, 8% more than the third quarter. Nonperforming assets grew 6%, to $452 million.
Noninterest income rose 34%, to $491 million. Excluding acquisitions since the fourth quarter of 2001, fee income rose 22%, to $444 million. In the year BB&T bought two banks in Kentucky and one in Florida, in addition to a collection of insurance agencies.
Expenses rose 20%, to $654 million, in part because of higher commissions and other incentives, as well as added expenses from acquisitions. Excluding acquisitions, expenses rose 10%, to $595 million.
Shares of BB&T fell 0.5%.
MHO is analysts are looking for BBT growth rate to slow from the pace of the past several years. As we get larger, the growth rate is tougher to maintain. With P/E 14+ and PEG above 13 were priced at a premium to our peers. Earnings growth will have to come from internal efficiencies rather than acquisitions. Again MHO is that we may see a stock split, maybe 5/4 or 4/3 not too far down the road based on past track record.