Comerica Shares Up 21.2% in a Year: Is It Worth Keeping an Eye On?

Comerica Incorporated CMA shares have gained 21.2% over the past year, outperforming the industry’s rise of 19.5%. Its peers, Northern Trust Corporation NTRS and BankUnited Inc. BKU, have gained 30.3% and 20.8%, respectively, over the same period.

Price Performance

What Factors Are Supporting CMA's Growth?

Improving Operational Efficiency: The company is aggressively optimizing its cost structure to boost profitability. The company has closed underutilized branches, reduced management layers, and enhanced digital tools. Execution of these initiatives will reduce expenses and improve return on equity (ROE).

These initiatives drove a 3.2% year-over-year decline in non-interest expenses in the first quarter of 2025. Its efficiency ratio in the first quarter of 2025 was 70.28%, down from 76.91% a year earlier, a clear sign of enhanced operating leverage.

Solid Net Interest Income (NII): Comerica has seen consistent improvement in its net interest income. Over the five-year period ending 2024, NII recorded a compound annual growth rate (CAGR) of 2.8%. The upward trend continued into the first quarter of 2025, with NII rising 4.9% year over year. Net interest margin also improved, expanding 38 basis points to 3.18% in the first quarter. The improvement in both metrics was driven by higher interest rate involvement.

The Federal Reserve lowered interest rates by 100 basis points in 2024 but has kept them steady since then. Given this, interest rates are expected to remain relatively high in the near term. Management expects full-year 2025 NII to increase 5%-7% over 2024.

Stable Loan Portfolio: Comerica’s loan portfolio has remained stable, with total loans recording a five-year CAGR of nearly 1% through 2024. As of March 31, 2025, total loans stood at $49.9 billion, though they declined 1.2% sequentially due to pressures in commercial lending. Despite this, the robust loan pipeline  are expected to support gradual loan expansion in the upcoming quarters.

Strong Liquidity Position: The liquidity profile of the company is solid, with a total liquidity capacity of $42.5 billion as of March 31, 2025. The bank also holds $25.4 billion in borrowing capacity at the Federal Reserve discount window and carries investment-grade credit ratings (A-, BBB, Baa1) from major agencies. This renders it favorable access to debt at attractive rates. Thus, decent cash levels and favorable borrowing capacity offer it decent financial flexibility and make the debt repayments seem manageable.

Impressive Capital Distribution: Comerica maintains a solid capital position with a Common Equity Tier 1 (CET1) ratio of 12.05%, well above regulatory minimums. The bank’s capital strength supports robust shareholder return programs. In the first quarter of 2025, Comerica repurchased $50 million in stock and continues to pay a quarterly dividend of 71 cents per share. Further, CMA’s dividend yield stands at 4.9%. Its peers, BankUnited and Northern Trust, offer a dividend yield of 3.7% and 2.8%, respectively.

Supported by decent earnings strength, capital strength, and solid liquidity levels, capital distribution activities seem sustainable.

Earnings Strength: Comerica has a decent earnings surprise history. In the trailing four quarters of 2024, the company beat the Zacks Consensus Estimate in three of four quarters, the average surprise being 12.58%.

Over the past three to five years, Comerica’s earnings per share (EPS) have registered a CAGR of 6.37%, notably higher than the industry average of 4.10%. Looking ahead, the company’s EPS is projected to decline 5.2% in 2025, followed by a rise of 9.8% in 2026.

Earnings Estimate

How to Approach CMA Stock Now?

Comerica’s efforts to improve operating efficiency, a strong liquidity profile, along with rising NII, are set to support CMA’s financials in the upcoming period.

Sales Estimate

However, CMA’s shares appear expensive relative to the industry. The company currently trades at a forward P/E of 11.26X, above the industry average of 11.05X.

Price-to-Earnings (P/E) F1

Hence, considering its expensive valuation, prospective investors can keep this Zacks Rank #3 (Hold) stock on their radar and can wait for a better entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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