Fifth Third Bancorp (FITB) also reports its fiscal fourth-quarter results before the opening bell, and Wall Street is forecasting earnings of 36 cents a share in the December-ended period on revenue of $1.53 billion.
The performance of the regional banks has been a bit of a mixed bag so far this quarter, and Fifth Third shares look vulnerable if the company can't deliver a convincing beat, having already gained 8% so far in 2012. Sentiment is fairly positive with 19 of the 32 analysts covering the stock at strong buy (7) or buy (12), and the median 12-month price target at $15 vs. Thursday's close at $13.56.
Miller Tabak reaffirmed strong buy rating on Fifth Third in late December and initiated a 2012 price target of $13.69. The stock was trading just below $12 at the time. The firm's investment thesis is based on a belief that Fifth Third is an attractive takeover target.
"[I]n the larger scheme of things, we believe the continuing evidence of FITB's good 'nuts and bolts' management is likely to draw interest from a strategic buyer during a fresh round of US banking industry consolidation in 2012-2013," Miller Tabak said. "We think the excellent balance-sheet stewardship of FITB management in recent periods is more likely to be rewarded in the M&A market than in the stock market."The firm has a point as Fifth Third's quarterly revenue has stalled out at around $1.5 billion but it's been able to beat Wall Street's earnings expectations handily in the past two quarters, delivering upside surprises of more than 20% both time. So if a deal were to come to pass, what kind of valuation might Fifth Third fetch? "[O]ur estimate of FITB's strategic-takeover NAV [net asset value] has increased to $23.8/share from the previous $23.2, and we expect that figure to keep increasing quarter by quarter," Miller Tabak said. "Trading just under 50% of our NAV estimate, we believe FITB represents an unusually attractive upside potential within the banking sector." Check out TheStreet's quote page for Fifth Third Bancorp for year-to-date share performance, analyst ratings, earnings estimates and much more.
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