PNC Financial’s Rating, Price Target Boosted at FBR Capital (PNC)

in Gold Gold Investing Gold Investment by admin — March 8, 2010 7:16 am | no comments

Regional banker PNC Financial Services ( PNC ) saw its rating and price target upped on Monday by analysts at FBR Capital Markets. The analyst boosted its rating on PNC to “Outperform” from “Market Perform,” and lifted its price target for the stock to $65 from $55. PNC shares had closed at $55.57 on Friday. FBR Capital noted that “On February 2, PNC announced a $3 billion common equity raise and the planned sale of its investment servicing business as part of a capital plan to repay the $7.6 billion TARP investment. As a result, the expected boost to tangible common equity shifted its risk profile in FBR’s Risk Index to low risk from medium risk, making it a low-risk, high-reward stock based on our Risk-Adjusted Valuation (RAV) framework. We expect this upgrade to be somewhat controversial due to investor concern surrounding the lower quality of earnings driven by purchase accounting accretion, which we estimate added $3.17 to our $3.63 FY09 operating EPS estimate. While we acknowledge that this earnings stream is lower quality, we believe that nearly $1.50 of this accretion can be recaptured as it stems from higher-cost CDs, which are transitioning into lower-cost core deposits at a rate greater than PNC’s initial expectations, and as the non-credit-impaired loan customers refinance or reprice into normal balance sheet loans. PNC also has some of the strongest credit metrics relative to peers, which we believe should limit downside risk from current levels. If PNC recaptures any of the accretion from the non-credit-impaired portfolio, it should provide upside to our estimated $5.00 to $6.00 range of “normal” EPS. We are leaving our FY10 and FY11 GAAP and operating EPS estimates unchanged.” PNC Financial shares rose 83 cents, or +1.5%, in premarket trading Monday. The Bottom Line We had removed share of PNC from our recommended list back on Oct.9,2008, when the stock was trading at $67.75. The company has a dividend yield of .72%, based on Friday’s closing stock price of $55.57. The stock has technical support in the $50 price area. If the shares can firm up, we see overhead resistance around the $60 price level. We would remain on the sidelines for now. PNC Financial Services ( PNC ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars. Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .