Comerica Misses, Sell Rec Sticks

Tags: cma
21 Oct 4:27am
Posted by ZacksResearch
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Comerica (CMA) reported 3Q08 income from continuing operations of $0.18 per diluted share. Excluding the one-time items, we estimate the operating earnings at $0.53 per diluted share, a penny short of our estimate.

Credit metrics worsened further during the quarter. After reviewing the results and the outlook provided by the management, we are moderating our FY08 and FY09 estimates and maintaining our Sell recommendation on the shares.

Comerica currently trades at 11.9x, the consensus forward estimate, at a 2% premium to the large-cap peer group median. On a price-to-book basis, the shares are trading at 3% premium to the peer median. Relative pricing continues to look very expensive on a P/E-to-growth (PEG) basis, using the consensus forward estimate and the consensus long-term growth rate.

Comerica's PEG ratio is 3.67x, a 84% premium to the 1.99 median for the peer group. However, on a price-to-book basis, the 3% premium looks attractive, given a ROE 53% above median (the ROE-adjusted P/B [return-on-equity price-to-book] is 23% below median). Our new six-month price target of $27.00 per share is based on a multiple of 12.4x our projected 2008 EPS.

Read the analyst note on CMA




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