Neutral on Commerce Bancshares

Zacks Equity Research

On Jun 3, 2013, we reiterated our long-term recommendation on Commerce Bancshares, Inc. (CBSH) at Neutral. This was based on the company’s sturdy capital base and solid liquidity position, despite its first-quarter earnings marginally missing the Zacks Consensus Estimate.

Why Neutral?

Commerce Bancshares has expanded through periodic acquisitions driven by a stable balance sheet position. Further, the company is an attractive choice for yield-seeking investors. The company has an effective share repurchase program and a consistent dividend payment policy. Moreover, it is conveniently poised for growth, given a rise in deposits and stable loan to deposit ratio.

Commerce Bancshares’ earnings of 67 cents per share were a penny below the Zacks Consensus Estimate. The lower-than-expected results were mainly due to a fall in revenues, partly offset by reduced operating expenses.  

Following the first-quarter results, the Zacks Consensus Estimate for 2013 fell by a cent to $2.84 per share over the last 60 days. For 2014, the Zacks Consensus Estimate dipped 1.0% to $2.91 per share, over the same time-frame. Hence, Commerce Bancshares currently carries a Zacks Rank #3 (Hold).

Additionally, net interest income will likely be adversely affected in the near to mid-term due to a decrease in average loans coupled with a low interest rate environment. Further, higher operating expenses remain a major concern for Commerce Bancshares.

Other Banks Worth Considering

Better performing Midwest banks include Enterprise Financial Services Corp. (EFSC),  First Interstate Bancsystem Inc. (FIBK) and Old Second Bancorp Inc. (OSBC), all of which carry a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on CBSH

Read the Full Research Report on OSBC

Read the Full Research Report on FIBK

Read the Full Research Report on EFSC

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