Commerce Bancshares: Black Friday Winner

NEW YORK (TheStreet) -- Commerce Bancshares (CBSH) was bank stock winner on Friday, with shares rising 3% to close at $39.20.

The broad indexes all gains of over 1% during an abbreviated Black Friday trading session. The U.S. economy calendar was empty.

On Thursday, when U.S. markets were closed for the Thanksgiving holiday, the HSBC Flash China Manufacturing Purchasing Managers' Index came in with a November reading of 50.4, which was the highest level for the PMI in 13 months. It was also the first time in 13 months that the PMI level was above 50, which indicates manufacturing expansion. The PMI rose from 49.5 in October.

Hongbin Qu -- HSBC's chief economist for China and co-head of Asian economic research for the firm -- said the flash PMI reading for China "confirms that the economic recovery continues to gain momentum towards the year end. However, it is still the early stage of recovery and global economic growth remains fragile. This calls for a continuation of policy easing to strengthen the recovery."

The KBW Bank Index (I:BKX) rose 2% to close at 49.17, with all 24 index components showing gains for the session.

Commerce Bancshares of Kansas City, Mo., has now seen its stock return 5% year-to-date, following a 3% return in 2011, which was a strong performance, considering that the KBW Bank Index dropped 15% last year.

The shares trade for a 1.5 times their reported Sept. 30 book value of $25.47, and for 13 times the consensus 2013 earnings estimate of $2.97 a share, among analysts polled by Thomson Reuters. The consensus 2014 EPS estimate is $3.07.

Based on a quarterly payout of 23 cents, the shares have a dividend yield of 2.35%.

Commerce has been one of the strongest and most consistent earners among the components of the KBW Bank Index, with operating returns on average assets ranging between 1.20% and 1.38% over the past five quarters, and returns on equity ranging between 11.49% and 12.73%, according to Thomson Reuters Bank Insight.

While several components of the KBW Bank Index have seen higher returns on equity during that period, Commerce is very strong capitalized, with a tangible common equity ratio of 10.49% as of Sept. 30, exceeded only by Peoples United Financial (PBCT), among the 24 index components.

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