BB&T Stock Beauty In the Eye of the Beholder

U.S. Bancorp's third-quarter ROA was 1.70% and its return on average common equity was 16.5%. The Minneapolis lender's shares closed at $34.23 Friday, returning 29% year-to-date and traded for 2.7 times tangible book value, and 11 times the consensus 2013 EPS estimate of $3.07. Based on a quarterly dividend of 19.5 cents, the shares have a yield of 2.28%.

BB&T's shares returned 21% year-to-date, through Friday's close at $29.78, and traded for 1.2 times their reported Sept. 30 tangible book value of $17.02, and for 10 times the consensus 2013 EPS of $2.95. Based on a quarterly payout of 20 cents, the shares have a dividend yield of 2.69%.

Sterne Agee analyst Todd Hagerman on Monday moved in the opposite direction as Horowitz, downgrading BB&T to "Neutral" from a "Buy" rating, while lowering his price target to $32 from $37, saying that "while the magnitude of margin decline going forward is not expected to equate to 4Q12, modest loan growth and healthy deposit growth will temper the expected ongoing margin pressure. However, expenses are likely to remain elevated as excessive regulatory costs and the planned build-out of the wholesale bank will challenge BBT from generating positive operating leverage."

Hagerman lowered his 2013 EPS estimate for BB&T to by 30 cents to $2.95.

FBR analyst Paul Miller on Monday reiterated his "Market Perform" rating for BB&T, with a price target of $33, and raised his 2013 EPS estimate by a nickel to $2.95, and said that although his target "and implied valuation reflect our view that while BB&T has considerable loan growth, overall earning asset balances will be slower to grow and near-term margin compression will likely offset a majority of this benefit."

Miller also said that "BB&T appears to be the best positioned of the Southeastern regional banks, as it was the only bank among its peers to report positive earnings in each of the last 12-plus quarters without the aid of large reserve releases. However, despite its superior earnings power, we remain cautious on the stock given its relatively high valuation makes shares more prone to weakness as near-term headwinds from low interest rates begin affecting the entire industry."

BBT data by YCharts

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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