FBR Capital Upgrades U.S. Bancorp (USB) to Market Perform; More Favorable Outlook

September 29, 2009 7:39 AM EDT

FBR Capital upgrades U.S. Bancorp (NYSE: USB) to Market Perform from Underperform, raises price target to $21 from $14.

FBR analyst says, "Upgrading USB and adjusting our core EPS estimates for FY09 and FY10 to $0.86 and $0.95, respectively, from $0.83 and $0.90. Our more favorable outlook on the shares is primarily driven by our new proprietary risk-adjusted valuation model, which we use as a tool to evaluate opportunities for achieving relative outperformance in the bank space. As we have written previously, our prior Underperform thesis was rooted in the belief that the shares were expensive relative to our expectations for FY10 earnings and our view of normalized earnings power ($2.00-$2.60) versus other large-cap bank alternatives. Since our initiation of the company on January 13, the shares of some of these cheaper alternatives to USB's stock have surged relative to USB shares, which has driven relative underperformance of USB shares totaling ~3,100 bps versus the SNL Large-Cap Bank Index and ~1,000 bps versus the S&P Bank Index. Although we would still maintain that upside to our view of normalized EPS is more muted given the current valuation on the shares, we note that this upside still falls near the middle of the pack in our more comprehensive view of the space according to our new valuation framework."

To see more analyst ratings on USB Click Here.

U.S. Bancorp operates as the holding company for U.S. Bank National Association that provides various banking and financial services in the United States.

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