U.S Bancorp: Analyst Upgrade Winner

Despite such strong performance, USB trades at only a slight P/E premium to many large banks that have much weaker earnings.

Stifel Nicolaus analyst Christopher Mutascio on Monday upgraded U.S. Bancorp and Wells Fargo (WFC) -- which has had similar recent earnings performance and trades even lower to earnings estimates -- to "buy" from "hold."

The analyst's price target for U.S. Bancorp is $39, implying 14% upside from Monday's close. His price target for Wells Fargo is $42, implying 19% upside from that company's closing price of $35.26 on Monday. Meanwhile, Stifel Nicolaus downgraded Fifth Third Bancorp (FITB) to "hold" based on the stock's relatively high valuation to his firm's earnings estimates.

Mutascio also downgraded Comerica (CMA) and KeyCorp (KEY) to "sell," citing limited earnings catalysts and valuations nearly in line with those of U.S. Bancorp and Wells Fargo.

The analyst said in his report that "the market is allowing investors to purchase low-risk franchises with strong management teams that are generating profitability ratios well in excess of the industry's average at 'no extra charge.' So why not take advantage of what the market is giving us?"

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

USB data by YCharts

Interested in more on U.S. Bancorp? See TheStreet Ratings' report card for this stock.

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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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