That's the view of Nomura analyst Bill Carcache in a Jan. 19 note that called KeyCorp a "quintessential value stock."
"While we get that it's viewed as less attractive than other regional banks that are more asset-sensitive and don't face PAA headwinds, we believe the valuation discount is excessive," Carcache wrote.
KeyCorp's earnings and return on tangible equity beat the industry median following tax reform benefits, but it still trades at the lowest multiple in its group, Nomura said. Shares traded higher 2.2% to $21.28 early Friday, up 19% over the past year.
"Overall, we walked away from 4Q17 results believing that KEY shares are likely re-rate over the next six months as investors shift their focus to 2019," Carcache said. The company reported fourth-quarter earnings Thursday, with profit in line with analyst expectations.
Carcache rated KeyCorp shares a "buy," with a $26 price target to imply 22% upside for Key stock.
Carcache hiked his full-year 2018 earnings forecast for Key to $1.76 from $1.56 a share. Carcache's forecast is higher than Wall Street's consensus estimate of $1.68, according to FactSet. For 2019, Nomura sees earnings rising to $1.95 from $1.72. FactSet analysts see 2019 earnings totaling $1.84 a share.
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