5. Trustmark Corp
Shares of Trustmark Corp (TRMK) of Jackson, Miss., is flat year-to-date , and is down about 2% over a one-year basis.
The company had $9.7 billion in total assets as of Dec. 31.Trustmark reported fourth-quarter net income of $24.3 million, or 38 cents a share, declining from $27.0 million, or 42 cents a share, in the third quarter, and $25.2 million, or 39 cents a share, in the fourth quarter of 2010. The fourth-quarter earnings decline mainly resulted from a $4.2 million write-down on loans that were covered by FDIC loss-sharing agreements, "as a result of loan payoffs and improved cash flow projections and lower loss expectations for loan pools." The loans were acquired when the company purchased the failed Heritage Banking Group of Carthage, Miss., in April of last year. Trustmark's fourth-quarter ROA was 1.01% according to SNL, and the ROA has ranged as high as 1.31% over the past five quarters. Based on a quarterly payout of 23 cents, the shares have a dividend yield of 3.8%. Despite these relatively positive metrics, the stock saw a wave of downgrades following its results. Morgan Keegan analyst Ebrahim Poonwala downgraded Trustmark to a "Market Perform" rating from "Outperform," saying the stock's "near term upside is likely to be limited given the macro challenges that TRMK and the banking industry face." Poonwala lowered his 2012 EPS estimate to $1.57 from $1.60 and his 2013 estimate to $1.66 from $1.70, "with the downward revisions driven by lower fee revenues and higher overhead costs." The analyst said that although the company is "well positioned to benefit from an ongoing US economic recovery," revenue and earnings growth would be challenging, "absent a material pick-up in industry-wide loan growth and a higher interest rate environment." KBW analyst Brian Klock also downgraded Trustmark -- to "Underperform" from "Market Perform" -- because "the core earnings power has weakened and could remain pressured this year, which should lead to [price] multiple contraction," and also because the company's "shares are already fully valued trading at a 13% 2013 P/E premium to peers and 21% premium to all US regionals." 3 out of 11 analysts rate the stock a sell or underperform, according to Bloomberg data. One analyst rates the stock a buy, while the remaining have a neutral rating. The consensus price target is $23.40. Shares closed at $23.89 on Tuesday.
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