Odeon Capital Group analyst Dick Bove lowered Comerica Inc. over beliefs that the strategy put in place by Boston Consulting Group is "more oriented to financial engineering than business building."
Comerica brought in Boston Consulting Group in 2016 to create new growth opportunities and lower its operating costs. The end goal, Bove wrote, was the bank's sale, which has not happened yet.
Since Boston Consulting Group came in, the company has spent $2.8 billion on share repurchases. The "financial engineering" helped increase EPS to an estimated $7.88 in 2019 from $2.68 per share in 2016. Despite all this, the stock is trading at $59.71 per share, down 12.3% from $68.11 per share at the end of the second half of 2016, the analyst noted.
Comerica made a "strategic mistake" in engaging Boston Consulting Group, and that could pressure earnings "for a couple of years," according to Bove. He believes the solution to the bank's woes is a sale.
"Comerica is the poster child of why bank managements should focus on growing their businesses and not the stock price," Bove wrote. He lowered Comerica's rating to "sell" from "buy."
His EPS estimates are $7.88 for 2019 and $7.74 for 2020.
