Should You Add Comerica Stock to Your Portfolio This Month?

NYSE: CMA | Comerica Incorporated  News, Ratings, and Charts

CMA – Shares of Comerica (CMA) have been slumping so far this year, despite multiple benchmark interest rate hikes. As the commercial bank’s spreads increase due to the monetary tightening policies, is CMA an ideal investment now? Let’s find out.

With $89.20 million in total assets (as of March 31, 2022), Comerica Incorporated (CMA) offers financial products and services. It operates through four segments: Commercial Bank; Retail Bank; Wealth Management; and Finance. Since March 2022, CMA has been focused on the structural transformation of its business to improve customer service and streamline its small business focus. CMA plans to consolidate 22 of its existing 432 U.S. locations across three of its retail markets by September this year.

Rising interest rates bode well for commercial banks, as they charge higher interest on loans to customers. However, given consumer spending has been decelerating over the past month amid inflationary pressures, as retail sales declined marginally in May. This, coupled with rising borrowing costs, could discourage lending in the upcoming months, adversely impacting CMA’s loan and interest income. Shares of CMA have declined 17.1% year-to-date.

Here’s what could shape CMA’s performance in the near term:

Bleak Financials

CMA’s interest and fees on loan income declined marginally year-over-year to $383 million in the fiscal first quarter ended March 31, 2022. Total noninterest income fell 9.6% from the same period last year to $244 million. Net income came in at $189 million, reflecting a 46% decline from the prior-year quarter. In addition, the comprehensive loss amounted to $772 million, compared to the $181 income reported in the same period last year. EPS declined 43.6% from the prior-year quarter to $1.37.

Moreover, CMA’s net operating cash outflow stood at $710 million, compared to the $159 million inflow in the prior-year quarter. Cash and cash equivalents came in at $13.55 billion as of March 31, 2022, down 8.9% from March 31, 2021. In addition, loan yields declined four basis points in the fiscal first quarter, while average deposits decreased by $5.4 billion.

Poor Growth Story

CMA’s revenues declined at a 2.4% CAGR over the past three years, while EBITDA fell at a rate of 9.1% per annum over this period. Trailing-12-month EBIT fell 2% year-over-year. The company’s net income and EPS declined 8% and 1.9% per year over the past three years. Furthermore, CMA’s total assets declined at a 4% CAGR over the past three years and a 3.8% rate over the past five years.

Over the trailing 12 months, the company’s total assets fell 15.7% year-over-year. Levered free cash flow declined at 3.6% per annum over the past three years. Over the past year, levered free cash flow fell 14.4% year-over-year.

Stretched Valuation

In terms of forward non-GAAP P/E, CMA is currently trading at 10.16x, 3.9% higher than the industry average of 9.78. Its trailing-12-month PEG multiple of 0.67 is 114.8% higher than the industry average of 0.31.

In addition, CMA is currently trading 3.03 times its forward sales, 7.6% higher than the industry average of 2.82. Also, its forward Price/Book ratio of 1.39 is 29.7% higher than the industry average of 1.07.

POWR Ratings Reflect Bleak Prospects

CMA has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

CMA has a grade of D for Quality and Growth. The company’s trailing-12-month ROA of 1.13% is 9.9% lower than the industry average of 1.25%, justifying the Quality grade. In addition, CMA’s revenues and net income have declined at rates of 2.4% and 8% per annum over the past three years, in sync with the Growth grade.

Of the 11 stocks in the F-rated Money Center Banks industry, CMA is ranked last.

Beyond what I’ve stated above, view CMA ratings for Sentiment, Stability, Momentum, and Value here.

Bottom Line

The Fed hiked the benchmark interest rates by 75 basis points yesterday, the largest hike in nearly three decades. However, analysts expect CMA’s EPS to decline 24.5% year-over-year in the fiscal second quarter (ending June) and 10% year-over-year in fiscal 2022. As the Fed is slated to maintain its aggressive stance amid persistent macroeconomic issues, CMA is best avoided now.

CMA shares were trading at $73.81 per share on Thursday afternoon, down $2.53 (-3.31%). Year-to-date, CMA has declined -13.72%, versus a -22.53% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
CMAGet RatingGet RatingGet Rating

Most Popular Stories on

:  |  News, Ratings, and Charts

Bear Market Game Plan Revealed!

The bear market has been firmly in place all year long. Just some folks didn’t get the memo til 6/13 when the S&P 500 (SPY) finally broke below the 20% decline level at 3,855 to appreciate just how bad things had become. That is the past. We need to focus on the future like how low the stocks will go...and the best trades to stay on the right side of the market action. All that and more is in Steve Reitmeister “Bear Market Game Plan”. Read on below for more...

:  |  News, Ratings, and Charts

Insiders Are Making Big Buys In Carvana – Should You?

Used car retailer Carvana (CVNA) has seen significant insider buying recently, reflecting bullish sentiments. However, given its bleak bottom-line positioning, should you invest in the stock now? Read on to find out...

:  |  News, Ratings, and Charts

Don’t Get Fooled by the Recent Market Rally

The S&P 500 (SPY) has bounced with gusto this week. Maybe the bear market is not here to stay? Ha! Don't make me laugh. This is just one in a long line of "suckers rallies" before the next leg lower. The reasons why are spelled out below in this week's market commentary...

:  |  News, Ratings, and Charts

3 Top-Rated High-Dividend Stocks Under $20

The Fed’s aggressive interest rate hikes in the face of the rising inflation are raising the possibility of the economy tipping into a recession. Given the market uncertainties, high-dividend stocks Sisecam Resources (SIRE), Grindrod Shipping (GRIN), and Alliance Resource (ARLP), which are currently trading under $20, could be an ideal investment to ensure a stable income stream. These stocks are rated Strong Buy or Buy in our proprietary rating system. Keep reading…

:  |  News, Ratings, and Charts

Don’t Get Fooled by the Recent Market Rally

The S&P 500 (SPY) has bounced with gusto this week. Maybe the bear market is not here to stay? Ha! Don't make me laugh. This is just one in a long line of "suckers rallies" before the next leg lower. The reasons why are spelled out below in this week's market commentary...

Read More Stories

More Comerica Incorporated (CMA) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All CMA News