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JPMorgan Adds a Bank to Top-Stock List and Subtracts One

Each month, JPMorgan publishes a list of top stock ideas from its analysts.
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JPMorgan has published its monthly list of top stock ideas from its analysts.

These companies were added to the list:

· Akero Therapeutics  (AKRO) , a biotechnology company;

· Carpenter Technology  (CRS) , a steelmaker; and

· Regions Financial  (RF) , a bank.

These stocks were subtracted from the list:

· Anywhere Real Estate  (HOUS) , a real estate services company, and,

· Signature Bank  (SBNY) , a bank.

For Akero, “current levels imply overly conservative expectations … for its lead NASH drug candidate,” JPMorgan analysts wrote in a commentary. NASH stands for non-alcoholic steatohepatitis, an advanced form of non-alcoholic fatty liver disease.

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Carpenter Technology is “leveraged to the recovery in aerospace, and has outlined a path for earnings to reach previous peak run rates within the next four quarters,” the analysts said. “We believe execution along those lines will drive a re-rating of the stock.”

Regions Financial is "better positioned for net-interest-income growth, due to higher excess liquidity and more conservative deposit … assumptions, than its peers,” the analysts said.

“It is also less reliant on markets-related revenue, which are pressured, and has done a good job of managing hedges to protect net interest margin.” The margin is the difference between what a bank takes in on loans and pays out on deposits.

Dropped From the List

Regarding Anywhere Real Estate, the investment firm said the housing slowdown is a “near-term headwind” that could depress the company’s earnings. But JPMorgan kept its rating on the stock at overweight.

Signature Bank “lowered its guidance for quarterly growth of loans and securities down from a $4 billion to $7 billion quarterly range to a $1 billion to $3 billion quarterly range for the third and fourth quarters of 2022,” the analysts said. JPMorgan rates Signature Bank overweight too.

Morningstar’s Take on Regions

Morningstar analyst Eric Compton assigns the company no moat and puts fair value for the stock at $21. It recently traded at $21.33.

“While most of the banks we cover reported flat or slight declines in their fee income this [second] quarter, Regions bucked the trend,” he wrote in a commentary. It reported fee growth of 10% quarter over quarter and 3% year over year.

“The recent acquisitions of Sabal Capital Partners and Clearsight Advisors are helping to provide some growth in capital markets, which bounced back even better during the second quarter than management had originally hoped for,” Compton said.

“Regions also increased its wealth-management income, which was a step above what most of its peers were able to do during the quarter.”

To be sure, “updated fee guidance for the rest of the year implies a slightly worse outlook than management guided to last quarter.”