Jefferies initiates Comerica with underperform, sets $47 target

On Tuesday, Jefferies began coverage on Comerica Incorporated (NYSE:CMA) with a rating that indicates expectations of the stock performing worse than the broader market. The research firm set a price target for Comerica stock at $47.00, signaling caution about the bank’s prospects. Data from InvestingPro shows 11 analysts have recently revised their earnings expectations downward, while the stock currently trades at $58.18 with a market capitalization of $7.64 billion. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels.

The initiation of coverage by Jefferies reflects several concerns about Comerica’s future financial performance. A significant point of worry is the anticipated loss of Direct Express deposits, which represent approximately 15% of the bank’s non-interest bearing deposits. This loss could potentially impact the liquidity and profitability of the bank, though InvestingPro data indicates the bank maintains a solid dividend yield of 4.85% and has consistently paid dividends for 55 consecutive years.

Additionally, Jefferies points to Comerica’s growth outlook, which appears less promising compared to its peers. While the average loan growth among peers is expected at around 2%, Comerica’s loan growth is projected to remain flat. Recent financial data from InvestingPro supports this concern, showing revenue decline of 2.38% over the last twelve months. This stagnant growth forecast could pose challenges to the bank’s ability to increase its market share and revenue.

Another factor contributing to the underperform rating is the efficiency ratio of Comerica, which is currently the highest among its peers. An efficiency ratio measures a bank’s overhead as a percentage of its revenue. A higher ratio typically indicates less efficiency and profitability. According to Jefferies, improvements in Comerica’s efficiency may rely on revenue growth, which could be a challenging task given the bank’s current growth projections.

Despite these challenges, it is noted that Comerica’s stock is trading at a premium compared to its peers. This premium valuation could be influenced by factors not specified in the coverage initiation, but it contrasts with the concerns raised by Jefferies regarding the bank’s financial health and competitive position.

Investors and market watchers will likely monitor Comerica closely in the coming months to see how the bank addresses the issues identified by Jefferies and whether it can adjust its strategies to improve its growth and efficiency metrics. For deeper insights into Comerica’s financial health and future prospects, investors can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports, which are available for over 1,400 US stocks.

In other recent news, Comerica Incorporated reported a notable change in its executive leadership. Brian S. Goldman, the Senior Executive Vice President and Chief Risk Officer, has announced his resignation, effective May 23, 2025. In the interim, Melinda A. Chausse will take on the additional role of Chief Risk Officer while the company searches for a permanent replacement. Additionally, Comerica’s Board of Directors underwent changes with Nancy Avila’s tenure as a director concluding, reducing the board to eleven members. Shareholders approved the election of these directors and ratified the appointment of Ernst & Young LLP as the independent registered public accounting firm.

On the financial front, Comerica surpassed earnings per share estimates, reporting $1.25 against Wall Street’s expectation of $1.14. Despite this, DA Davidson revised its price target for Comerica to $56, citing lower revenue forecasts due to a weaker loan outlook. UBS maintained a Neutral rating with a price target of $59, noting that the company’s net interest income exceeded expectations but was offset by lower fee revenue. Furthermore, Comerica appointed Eric Teal as the new Chief Investment Officer, bringing over three decades of experience to the role. These developments reflect Comerica’s ongoing efforts to navigate leadership and financial challenges while maintaining strategic growth.

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