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On Monday, Morgan Stanley (NYSE:MS) adjusted its stance on Comerica Incorporated (NYSE:CMA), downgrading the bank’s stock rating from Equalweight to Underweight. The firm also reduced the price target for Comerica shares to $55.00 from the previous target of $63.00. The revision comes amidst growing concerns over macroeconomic uncertainty and its potential impact on the banking sector. According to InvestingPro data, six analysts have recently revised their earnings expectations downward, while the stock has declined 12.6% in the past week alone.
Morgan Stanley analysts pointed to the likelihood of middle market companies delaying strategic investment spending as a key factor that could negatively influence Comerica’s loan growth. The analysts also noted that an inverted yield curve might lead to an increase in loan paydowns, as companies look to refinance their loans through public or private debt markets. Despite these challenges, InvestingPro analysis shows the bank maintains a solid dividend yield of 5.5% and has consistently paid dividends for 55 consecutive years.
Comerica, which has a significant portion of its portfolio in commercial and industrial (C&I) loans, shows a higher exposure compared to its peers, with 56% of its loans in this category versus the peer median of 35%. Morgan Stanley’s projections for Comerica in 2025 include an average loan growth decline of 1% year-over-year, which is below the management’s guidance range of flat to a 1% increase.
The firm’s analysts also estimate that Comerica’s net interest income (NII) will rise by 4.6% year-over-year in 2025. This forecast is less optimistic than the guidance provided by Comerica’s management, which anticipates a 6-7% increase in NII, including the effects of the Bloomberg Short-Term Bank Yield Index (BSBY).
The downgrade reflects Morgan Stanley’s cautious outlook on Comerica’s financial performance in the face of uncertain economic conditions and market dynamics that could challenge the bank’s growth and profitability.
In other recent news, Comerica Incorporated has been the subject of several analyst assessments following its latest financial updates. The company’s recent earnings report revealed operating earnings per share of $1.29, surpassing both UBS’s estimate and the consensus. Despite this, UBS maintained a Sell rating with a $64 target, citing weaker implied pre-provision net revenue power for 2025. DA Davidson also reiterated a Neutral rating with a $67 target, noting that Comerica’s average loan and deposit trends align with earlier forecasts.
RBC Capital Markets adjusted Comerica’s price target to $76, maintaining an Outperform rating, and highlighted the positive impact of net interest income growth. Keefe, Bruyette & Woods lowered their price target to $77 while keeping an Outperform rating, pointing to a gradual path to improved profitability. Similarly, Baird reduced its price target to $75 but maintained an Outperform rating, indicating potential limitations on EPS growth for 2025.
These developments underscore the varied perspectives among analysts regarding Comerica’s financial trajectory. The company’s financial performance and strategic positioning continue to be key points of interest for investors. As Comerica navigates the evolving financial landscape, the insights from these firms provide a detailed view of the company’s current standing and future prospects.
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