NEW YORK (TheStreet) -- Shares of Fifth Third Bancorp (FITB) are slumping 2.05% to $20.51 in Wednesday's midday trading after analysts at Robert W. Baird downgraded the financial services company today to "neutral" from "outperform" with a price target of $21.
The analyst firm cites a now-balanced risk-reward on the shares, noting that the move was a valuation call.
However, the company posted strong first quarter results, reporting revenue of $1.5 billion, or 44 cents per share, compared to revenue of $1.46 billion, or 36 cents per share in the same quarter last year. Overall, this was a 19% increase in profits.
The company was expected to post revenue of $1.45 billion, or 37 cents per share in the first quarter, according to analysts polled by Thomson Reuters.
For the current fiscal year, analysts at Thomson Reuters expect that Fifth Third Bancorp will post $1.67 per share.
TheStreet Ratings team rates FIFTH THIRD BANCORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate FIFTH THIRD BANCORP (FITB) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FITB's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Commercial Banks industry average. The net income increased by 13.5% when compared to the same quarter one year prior, going from $318.00 million to $361.00 million.
- Net operating cash flow has increased to $503.00 million or 47.94% when compared to the same quarter last year. In addition, FIFTH THIRD BANCORP has also vastly surpassed the industry average cash flow growth rate of -30.59%.
- The gross profit margin for FIFTH THIRD BANCORP is currently very high, coming in at 88.00%. Regardless of FITB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 22.56% trails the industry average.
- In its most recent trading session, FITB has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full analysis from the report here: FITB Ratings Report