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
TheStreet Open House

2 'Best' Bank Stocks Downgraded to 'Underperform'

"We are less optimistic on improvement in profitability vis-à-vis peers and consider the premium valuation (18.5x FY14E vs. TX peer median of 15x) less warranted relative to the fundamentals."

Rabatin's price target for Cullen/Frost's shares is $61.50, and he estimates the company will earn $3.80 a share this year, with EPS growing to $3.97 in 2014, and $4.33 in 2015.

First Financial Bancshares

First Financial Bancshares had $5.0 billion in total assets as of June 30. The stock closed at $62.93 Monday, returning 63% this year, following a 20% return during 2012.

The shares trade for 23.0 times the consensus 2014 EPS estimate of $2.73.

Based on a quarterly payout of 26 cents, the shares have a dividend yield of 1.65%.

"The company is one of the best operated, well-run banks in the country (noting a 1.62% trough ROA through the credit cycle) and we were too conservative when the valuation was a more reasonable 15-16x forward earnings power," Rabatin wrote in a note on Tuesday. "However, with the shares today at 23x our FY14E and receiving what we believe to be the benefit of deploying capital that has yet to appear likely, we think the shares of this high quality company are ahead of themselves."

First Financial reported a very strong Tier 1 leverage ratio of 10.32%, and a ratio of total equity to assets of 11.56%, as of June 30.

Rabatin estimates the company will earn $2.50 a share this year, with EPS rising to $2.69 in 2014 and $2.90 in 2015.

The analyst did include a caveat: "Going Against FFIN is Typically a Bad Idea."

"While we think the shares are likely to underperform small-cap and mid-cap peers in the near term, we feel compelled to point out the consensus rating is already fairly bearish on the shares, as is the level of shares shorted (17% of outstanding)," Rabatin wrote. "Over the longer term we are likely to be more positive on FFIN."

RELATED STORIES:


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

>Contact by Email.

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.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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