Why SunTrust Banks Inc. Shares Could Stall

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 analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of SunTrust Banks  (NYSE: STI  ) slipped nearly 1% in pre-market trading Tuesday after Evercore Partners downgraded the bank holding company from overweight to equal weight.

So what: Along with the downgrade, analyst John Pancari reiterated his price target of $40, representing just 2% worth of upside to yesterday's close. So while momentum traders might be attracted to SunTrust's price strength over the past year, Pancari's call could reflect a sense on Wall Street that the risks surrounding the company's net interest margin, or NIM, are being largely overlooked.

Now what: According to Evercore, SunTrust's risk/reward trade-off is particularly unappealing at this point. "STI reported a mixed 2Q marked by stronger loan growth, lower LLP, and better expenses, but also a weaker NIM," said Pancari. "Bottom line: While we are encouraged by STI's strengthening loan growth and well-contained expenses, EPS growth is limited by prevailing NIM headwinds. Such pressure results in a downside revision to our already conservative NIM outlook, and poses risk to Street EPS ests." When you couple that downbeat view with SunTrust's industry-topping P/E of 16, it's tough to disagree with Evercore's cautious stance.

SunTrust + Apple? This device makes it possible.
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its destined to change everything from banking to health care. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here


Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 22, 2014, at 9:43 PM, rsinj wrote:

    Your view as well as Evercore's are extremely short-sighted. Earnings beat estimates by a wide margin and that results in a downgrade? As far as NIM, most investors realize interest rates are headed higher - NIM will only improve going forward. STI shares are a buy at current price, strong buy at $35.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3038359, ~/Articles/ArticleHandler.aspx, 9/20/2014 2:22:12 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement