Bank of American Cuts Rating, Target for U.S. Bancorp; Says Valuation is too High to Maintain (USB)

Regional banker U.S. Bancorp (USB) on Thursday caught a big downgrade from analysts at Bank of America.

The firm cut its rating on USB from “Buy” to “Neutral” and reduced its price target from $37 to $35. That new target suggests zero upside to the stock’s Wednesday closing price of $34.60.

A Bank of America analyst commented, “…we believe that USB’s above average valuations will come under pressure based on a declining ROTE that we forecast. While we expect USB’s fundamentals to remain best-in-class, we see better upside in money center names C (30% to our PO; here) and JPM (16%; here), and prefer PNC and WFC in the regional banks. Investors have gravitated toward the relative ‘safety’ of the regional banks given the lower global macro/US policy risk associated with these names and better earnings visibility vs. the money centers.”

U.S. Bancorp shares were mostly flat in premarket trading Thursday.

The Bottom Line
Shares of U.S. Bancorp (USB) have a 2.25% dividend yield, based on last night’s closing stock price of $34.60. The stock has technical support in the $30 price area. If the shares can firm up, we see overhead resistance around the $35-$38 price levels.

U.S. Bancorp (USB) is not recommended at this time, holding a 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.

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