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Comerica (NYSE:CMA) and First Citizens Bancshares (NASDAQ:FCNCA) were upgraded at Raymond James ahead of the Q2 earnings season.
Analysts at the investment bank raised their recommendation on the stocks to Outperform from Market Perform.
Raymond James Analyst Michael Rose said about Comerica that “sentiment on the group could be in a bottoming process, quarterly EPS could trough in Q2, it is poised to generate stronger than peer projected [pre-provision net revenue] growth in ’25, and it has an attractive relative valuation.”
The stock is expected to be a winner in the case of a Republican sweep or split government under Donald Trump, considering its depressed valuation, takeout potential, and benefit from investors shifting out of larger banks. The research report noted that the election win could lead to a more favorable regulatory/ M&A backdrop for banks.
The price target on the stock is established at $60, while CMA is currently trading 0.65% higher from its previous close at $51.13.
The investment bank trimmed its 2024 EPS estimate on Comerica to $4.80 from $5.05, but kept its 2025 estimate unchanged at $5.90.
Meanwhile, First Citizens Bancshares was upgraded considering a strong positive EPS momentum, liquid short-duration balance sheet, benefits from a Republican sweep, and an uptick in the overall economic activity allowing the bank to fully leverage its enhanced commercial bank, analyst David Long said in the report.
“Additionally, we maintain a positive bias to our EPS estimates as its net interest income guide in April included a June rate cut that did not happen,” Long noted, adding that they are pleased with the bank’s integration of legacy SVB into First Citizens.
The price target on FCNCA is set at $1,900, while the stock closed 1.80% higher at $1,728.20.
The upgrades come amid the view that the bank earnings could remain under pressure, where higher rates on average vs. 1Q24 and softer loan growth could result in net interest income falling short of expectations.
The bank stocks could remain out of favor, given credit costs are expected to generally increase and noninterest expenses could be flat to down sequentially, according to Raymond James.
“Sentiment can change quickly dependent on the rate/credit outlook along with the looming election cycle (link) where the performance of President Biden in last week’s debate (link) could be the beginnings of shifting sentiment for the sector,” the investment bank noted.
FCNCA gets a Buy rating on average from sell-side analysts and Seeking Alpha authors, and a Strong Buy from the Quant Rating system.
CMA gets a Hold rating from the sell-side analysts, SA authors as well as the Quant.