Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Comerica Shares Lost 15.8% in March

By Lou Whiteman – Apr 6, 2019 at 11:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A pair of analyst downgrades hit ahead of an unexpected Federal Reserve twist.

What happened

Shares of Comerica (CMA 1.04%) fell 15.8% in March, according to data from S&P Global Market Intelligence, as a pair of analysts called a top for the shares early in the month and the Federal Reserve took an unexpected turn against bank stocks a few weeks later.

So what

Comerica shares were hit with two downgrades early in the month. On March 6, Stephens analysts reduced their ratings on eight banks, including Comerica, concluding that after a strong run for the sector to start 2019 thanks in part to the excitement surrounding some high-profile merger announcements, the risk/reward potential for the shares was less attractive. The analysts rerated Comerica as "equal weight," down from "overweight."

A banker at his desk shakes hands with two customers.

Image source: Getty Images.

A week later, Wedbush followed suit, downgrading Comerica to "neutral" from "outperform" on fears that earnings growth would be more challenging in 2020 for a range of factors.

The warnings of a slowdown proved to be astute later in March, when the Federal Reserve took an unexpected dovish turn, throwing future rate increases into doubt and pressuring bank stocks. The stock losses in the sector continued as 10-year Treasury bond yields fell below the yields on a three-month Treasury, meaning the yield curve was inverted for the first time since 2007. Investors often view an inverted yield curve as a sign of economic trouble on the horizon.

Now what

Comerica is a well-run bank, with a 1.72% return on assets well above the industry benchmark of 1%. It also offers an attractive 2.85% dividend yield at current prices.

That said, with the Fed on the sidelines and the economy potentially teetering, the next few quarters could be difficult for bank stocks in general and Comerica in particular. Comerica's interest-bearing deposit cost is well below that of its peer group average, which was an advantage during a period of rising rates but could work against it now.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Comerica Stock Quote
$71.74 (1.04%) $0.74

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.