In a note issued Thursday morning, Bank of America analyst Kenneth Bruce came out bullish on the credit card industry amid acceleration in the loan growth rate.
Bruce wrote, "Investors have anxiously awaited loan growth in the sector, in our view, so the improving prospects should support a healthier earnings outlook and better valuations, as visibility improves."
In light of this development, Bruce has reiterated his Buy ratings on American Express (NYSE: AXP), Capital One Financial (NYSE: COF) and Discover Financial (NYSE: DFS) and raised the respective price targets from $94, $84 and $63 to $105, $94 and $73.
Bruce is expecting improvements in American Express' revenue momentum and continued expense discipline in the near-to-medium term.
Bruce is estimating EPS of $5.44, $6.00, and $6.75, respectively, for 2014-2016. Looking ahead, he said "more robust growth" could lead to a positive estimate revision cycle.
Capital One Financial
Bruce commented, "Capital One Financial' earnings prospects are increasingly demonstrating more strength, given healthy credit trends and accelerating loan growth."
In line with his bullish view, Bruce has raised his 2014-2016 EPS estimates for Capital One from $7.25, $7.60, and $8.00 to $7.35, $7.76, and $8.17, respectively.
Bruce expects solid loan growth to drive future EPS growth for Discover Financial and has raised his 2014-2016 estimates from $5.25, $5.75, and $6.25 to $5.28, $5.82, and $6.36, respectively.
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