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J.P. Morgan downgrades Comerica on stock 'value trap'

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J.P. Morgan downgrades Comerica on stock 'value trap'

Downgrades

J.P. Morgan analyst Steven Alexopoulos downgraded Dallas-based Comerica Inc. driven primarily by a negative outlook on future EPS growth.

While the company's stock appears "cheap on the surface," it is "much more of a value trap than value," Alexopoulos wrote. He also wrote that given the persistent net interest margin headwind from lowering interest rates combined with the company's lack of offsets, he believes EPS growth will trend negatively into 2020 and be below current consensus.

The analyst downgraded the company's stock rating to "underweight" from "neutral" and lowered his price target to $65 from $70. His EPS estimates are $7.75 for 2019 and $7.13 for 2020.

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Piper Jaffray analyst Brett Rabatin downgraded Comerica Inc. over beliefs that it will take six to eight quarters before the company is on a higher trajectory due to NIM pressure from the lowering interest rate environment.

Despite being more profitable than its peers and the "cash cow" nature of the balance sheet, valuation expansion is not very likely following its third-quarter earnings report of lower revenues and lack of operating leverage, the analyst wrote.

The analyst downgraded the company's stock rating to "neutral" from "overweight" and lowered his price target to $72.50 from $74.50. His EPS estimates are $7.82 for 2019 and $7.27 for 2020.

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Janney Montgomery Scott analyst Timothy Coffey downgraded Los Angeles-based Preferred Bank based on valuation.

The analyst said NIM compression seen during the third quarter is likely to continue through the first half of 2020. Net interest income, which is about 95% of the company's operating revenue, could slow in the next three quarters due to lower rates on loans and overall earning assets, Coffey wrote.

The analyst downgraded the company's stock rating to "neutral." He raised his 2019 EPS estimate to $5.11 from $5.05, but his 2020 EPS estimate remained unchanged at $5.04.