6. Zions Bancorporation
Shares of Zions Bancorporation (ZION) of Salt Lake City closed at $19.13 Friday, returning 18% year-to-date, after declining 33% last year.
The shares trade just below the company's reported March 31 tangible common equity per common share of $19.39, and for ten times the consensus 2013 earnings estimate of $1.85. The consensus 2012 EPS estimate is $1.27.
D.A. Davidson analyst Gary Tenner on June 5 upgraded Zions Bancorporation to a "Buy" rating with a 12-18 month price target of $22 and a five-year price target of $40. That's a refreshing approach, since most sell-side analysts stick to 12-month price targets for long-term investments.Tenner upgraded the shares because they had declined 15% since his April 24 downgrade to a "neutral rating, saying after the shares closed at $17.54 on June 4 that "we find value in ZION shares trading at a 10% discount to 1Q12 [tangible book value] of $19.39 and an 18% discount to our year end 2013 estimated TBV of $21.46." Tenner's actions illustrate the volatility for the shares over the short-term. While most industry players face compression of net interest because "low short-term rates have been a constant feature on the banking landscape since December 2008 and have been joined more recently by historically low longer-term treasury yields," Tenner said that "ZION may not be as impacted as others." "Given ZION's small securities portfolio (8.2% of earning assets) and high cash balances, the company's average earning asset yield already incorporates a high degree of low-yielding assets." Redemption of higher yielding trust preferred securities, along with the expected repayment of $700 million in remaining federal bailout funds received through the Troubled Assets Relief Program, or TARP, 2008, will also mitigate some of the company's margin compression. Tenner estimates that Zions will earn $1.13 a share this year, followed by 2013 EPS of $1.65. Interested in more on Zions Bancorporation? See TheStreet Ratings' report card for this stock.
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