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Compass Point upgrades CapStar Financial to 'neutral'


Compass Point Research & Trading LLC analyst Laurie Havener Hunsicker raised her rating on Nashville, Tenn.-based CapStar Financial Holdings Inc.'s stock to "neutral" from "sell."

The analyst raised CapStar's EPS estimates to $1.08 from $1.02 for 2018 and to $1.23 from $1.15 for 2019, while keeping the price target unchanged at $17. She introduced an EPS estimate of $1.43 for 2020.

Hunsicker wrote that CapStar is a valuable franchise, and in case its board decides to sell the company, there is upside from current trading levels. The analyst further wrote that in the near term, CapStar has expressed desire in going for M&A in Nashville, Tenn., and its management is committed to a path of independence. CapStar may not be a seller in the near term, but in the next three years, it could possibly be worth around $20 to $22 per share in a takeout, Hunsicker added.

Regarding CapStar's acquisition of Athens, Tenn.-based Athens Bancshares Corp., the analyst wrote that the deal is an upside-down transaction that did not make financial sense as it apparently caused significant dilution to tangible book with a lengthy earnback, and was outside the widely accepted rule of no more than 5% tangible book dilution and five years to earn back.


Hunsicker also upgraded Richmond, Va.-based Union Bankshares Corp.'s stock to "buy" from "neutral," while keeping the price target unchanged at $41.

The analyst raised Union Bankshares' EPS estimates to $2.46 from $2.43 for 2018, $2.81 from $2.77 for 2019 and $3.18 from $3.16 for 2020.

The analyst wrote that shares of Union Bankshares have overreacted in the past couple of weeks to both an "operating EPS miss that had many noisy non-core items" that were reported in the company's third-quarter earnings, as well as to the recently announced deal for Access National Corp.