Comerica Incorporated CMA is a promising stock now due to its diligent efforts to enhance profitability through GEAR Up Initiatives. Also, the company’s organic and inorganic growth strategies make it well poised for future endeavors. Further, earnings growth prospects and favorable valuation make it an attractive pick.
Comerica not only beat estimates in the last reported quarter, but has also been witnessing upward estimate revisions, reflecting analysts’ optimism about its prospects. Over the past 60 days, the Zacks Consensus Estimate for 2019 and 2020 has inched up 2.4% and nearly 1%, respectively.
Further, this Zacks Rank #2 (Buy) stock has gained around 18.4% over the past six months, outperforming 8.9% growth recorded by the industry.
Notably, Comerica has a number of other aspects that make it an attractive investment option.
Why Comerica is an Attractive Pick
Revenue Strength: Comerica continues to make steady progress toward improving its top line. Revenues witnessed a 9.1% compounded annual growth rate (CAGR) over the last five years (2014-2018). Also, the company’s projected sales growth (F1/F0) of 4.59% (the industry average was 2.79%) indicates constant upward momentum in revenues.
Earnings Growth: Comerica has witnessed earnings growth of 19.87% in the last three-five years compared with industry’s 10.87% growth. In addition, the company’s long-term (three-five years) estimated EPS growth rate of 19.6% promises rewards for investors over the long run. Additionally, it delivered average positive earnings surprise of 7.23% in the preceding four quarters.
Involvement in Strategic Growth Initiatives: Comerica’s focus on improving operational efficiency led to the introduction of GEAR Up initiatives in mid-2016.Execution of these initiatives, along with an increase in short-term rates, resulted in an efficiency ratio of 53.6% in 2018, improving from 58.6% in 2017. Also, these initiatives are anticipated to deliver additional benefits in pre-tax income of $35 million in 2019 and beyond.
Steady Capital Deployment Activities: In January 2019, the board of directors hiked quarterly dividend by 12% and approved a plan to repurchase an additional 15 million in common shares. Moreover, the company’s debt/equity ratio and dividend payout ratio compares favorably with that of the broader industry reflecting the fact that such dividend hikes are sustainable.
Strong Leverage: Comerica’s debt/equity ratio is valued at 0.86 compared to the industry average of 0.92, indicating a relatively lower debt burden. It also highlights the financial stability of the company despite an unstable economic environment.
Superior Return on Equity (ROE): Comerica’s ROE of 15.84% compared with the industry average of 12.83% underlines the company’s commendable position over its peers.
Stock is Undervalued: With respect to the price-to-earnings (P/E) and PEG ratios, Comerica looks undervalued. The company’s P/E ratio of 10.17 is below the industry average of 10.75. Also, the PEG ratio of the company is 0.52 compared with the industry average of 1.26.
Additionally, Comerica has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and to identify stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Favorable VGM Score: Comerica has a VGM Score of A. Our research shows stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Stocks to Consider
Fifth Third Bancorp FITB has witnessed slight upward estimate revisions for current-year earnings, over the past 30 days. Over the past three months, the company’s share price has been up more than 11%. It currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank here.
Webster Financial Corporation’s WBS current-year earnings estimates have been revised slightly upward for the past 30 days. In addition, the stock has jumped more than 8%, over the past three months. It currently carries a Zacks Rank of 2.
Bank of Hawaii Corporation BOH has witnessed nearly 1% upward estimate revision for current-year earnings, over the past 60 days. Also, the company’s shares have risen nearly 14% over the past three months. It currently carries a Zacks Rank #2.
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