This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

SunTrust: Financial Loser

NEW YORK ( TheStreet) -- SunTrust (STI - Get Report) was the loser among the largest U.S. financial companies on Monday, with shares pulling back 2% to close at $29.76.

The broad indexes were down slightly, as investors awaited the results of a two-day meeting of European finance ministers in Luxembourg, which may include a financial aid package for Spain.



The KBW Bank Index (I:BKX) declined slightly to close at 51.17, with all but three of the 24 index components seeing declines. The index has returned 30% year-to-date, compared to an 11% return for the Dow Jones Industrial Average and a 16% return for the S&P 500 (SPX.X).

So what are investors to think about bank stocks, heading into third-quarter earnings, with mixed economic signals, and a financial industry still facing so many challenges?

"Our large cap bank coverage universe now trades at a median P/E multiple of 10.2x our 2013 EPS estimates," Stifel Nicolaus analyst Christopher Mutascio said early Monday, adding that the median forward price-to-earnings ratio for banks covered by his firm was "76% of the S&P 500 2013 P/E multiple of 13.5x - which is dead in line with the group's 15+ year median of 76%."

Mutascio also said that the group of banks covered by trades for the same 10.2 multiple of consensus earnings estimates.

The analyst also said that "if the banks continue their recent outperformance, then investors must be either arguing for an upward revaluation of the sector (banks are worth more today versus the broader market than they have historically) or they suspect the earnings normalization process will happen sooner than later." Using Stifel Nicolaus's "normalized" earnings estimates, Mutascio said banks covered by his firm would trade at a median forward P/E of "70% of the S&P 500's current 2013 P/E multiple (9.5x vs. 13.5x)," which "could suggest some further outperformance against the broader market for the banks will occur until they achieve the historical P/E multiple of 76% of the S&P 500."

Investors may be taking the long view and looking past the media and the brokerage analysts -- who typically rate stocks with 12-month investment horizons -- as they appear "currently willing to value the banks on what their future earnings prospects could be under a more normal interest rate environment (no matter when it may occur) or perhaps they are awarding a higher multiple for mortgage banking activity than they have historically."

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AXP $81.59 -1.99%
STI $41.00 -0.44%
WMT $83.93 0.16%
AAPL $128.46 -1.50%
FB $78.97 -1.79%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs