Jefferies Upgrades U.S. Bancorp (USB) to Buy
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Jefferies upgraded U.S. Bancorp (NYSE: USB) from Hold to Buy with a price target of $57.00 (from $48.00) to reflect post-election stock/EPS dynamics.
Analyst Ken Usdin commented, "We like USB for its consistent earnings performances, diversified income streams, and goldilocks positioning (large scaled businesses, but not a G-SIB level bank). We believe its post-election relative valuation understates its best-in-class return on equity. USB should benefit from higher rates and a lower Federal tax rate, but to a lesser extent vs. its peers. However, we believe this dynamic is already reflected in shares, which have underperformed its peer group by 9% since the election (+9% for USB vs. +18% for largecap banks). If new pro-growth policies help spending trends and U.S. GDP, USB’s payments businesses (16% of revs.) should benefit directly. Additionally, pension costs could benefit in ’17 if long-term rates continue to move higher through year-end. As of 12/31/15, a 100bp increase in the pension discount rate could boost net income by 1%."
Shares of U.S. Bancorp closed at $49.42 yesterday.
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