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5 Buy-Rated Banks From Guggenheim

NEW YORK ( TheStreet) -- Bank stock investors need to look beyond current bargains and focus on companies with strong prospects for earnings growth.

As discussed in today's article on banks that are cheaply priced to 2013 earnings estimates, the "bargain shopping" approach of looking for names trading for low multiples to tangible book values has worked for investors during the current bank stock recovery, but going forward, earnings growth will be the name of the game for long-term investors.

Guggenheim Securities analyst Marty Mosby on Wednesday reiterated his "Buy" ratings for three "high quality banks that can generate earnings growth," while upgrading two others that are going through major transitions to "Buy" ratings, and downgrading three that "have recently experienced significant favorable price moves" to neutral ratings.

First the downgrades:
  • Mosby downgraded BB&T (BBT) to a neutral rating from a "Buy" rating, while leaving his price target unchanged at $34, saying that that BB&T's closing price on Tuesday of $31.37 already reflects the Winston-Salem, N.C., lender's earnings potential for 2013. BB&T's shares have returned 25% year-to-date, and the shares trade for 11 times the consensus 2013 earnings estimate of $2.96 a share, among analysts polled by Thomson Reuters. Mosby estimates BB&T will earn $2.60 a share this year, followed by EPS of $3.07 in 2013.
  • Guggenheim downgraded SunTrust (STI) of Atlanta to neutral from "Buy," with an price unchanged price target of $26, with Mosby also saying the company's 2013 EPS potential was baked-into the share price. SunTrust has returned 40% year-to-date, closing Tuesday at $24.65. The shares trade for nine times the consensus 2013 EPS estimate of $2.69. Mosby estimates the lender will earn $1.80 a share during 2012, followed by 2013 EPS of $2.25.
  • Mosby also downgraded M&T Bank (MTB) of Buffalo, N.Y., to a neutral rating from a "Buy," while raising his price target by a dollar to $96, saying that "M&T Bank continues to be a safe haven with little downside, in our view, but as the economy continues to improve we would value this downside protection less." M&T returned 14% year-to-date through Tuesday's close at $86.26. The shares trade for 12 times the consensus 2013 EPS estimate of $7.39. Mosby estimates M&T will earn $6.95 a share this year, followed by 2013 EPS of $8.00.

The following five bank stocks were either upgraded or had their "Buy" ratings reiterated by Mosby:
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