Why U.S. Bancorp Might Pull Back

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of US Bancorp (NYSE: USB  ) slipped slightly this morning after Keefe, Bruyette & Woods downgraded the banking giant from outperform to market perform.

So what: Along with the downgrade, analyst Christopher Mutascio lowered his price target to $44 (from $45), representing just 4% worth of upside to yesterday's close. So while momentum traders might be attracted to the stock's steady climb over the past year, Mutascio's call suggests growing concern on Wall Street over US Bancorp's valuation.

Now what: According to Keefe Bruyette, US Bancorp's risk/reward trade-off is pretty balanced at this point. "We are lowering our 2014 and 2015 EPS estimates to $3.17 and $3.37 from $3.25 and $3.45, respectively due to the combination of more conservative loan loss reserve release assumptions and lower mortgage banking revenues," said Mutascio. When you couple that downbeat outlook with the stock's sector-topping price-to-book of 2.1, it's tough to disagree with Keefe Bruyette's downgrade. 

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