PNC: Financial Loser
The Dow Jones Industrial Average (^DJI) and the S&P 500 Index (SPX.X) ended with slight declines, while NASDAQ Composite (^IXIC) was down 1%, despite a strong earnings from Home Depot (HD) that provided more evidence of a U.S. housing recovery.
Home Depot reported net earnings of $947 million, or 63 cents a share for its fiscal third quarter ended Oct. 28, increasing from $934 million, or 60 cents a share, in the third quarter of fiscal 2011. Fiscal third-quarter sales increased 4.6% year-over-year to $18.1 billion, while comparable sales rose 4.2%.
The company raised its fiscal 2012 guidance to 5.2% annual growth in sales, and also said it expected fiscal 2012 EPS to increase by 18% year-over-year, to $2.92. The guidance reflects "the Company's intent to repurchase $700 million in additional shares in the fourth quarter of fiscal 2012, which will bring the total dollar amount of shares repurchased to $4 billion for the year."
KBW Bank Index (I:BKX) was down over 1% to close at 47.66, with all 24 index components showing declines for the session, as investors continued to worry over the negotiations between President Obama and Republican members of the House of Representatives over the "fiscal cliff." Meanwhile, eurozone leaders concluded another meeting in Brussels without settling on the timeline that Greece must follow in reducing its debt to 120% of its gross domestic product, in order to receive its next installment of bailout funds.
PNC's shares are now down 2% year-to-date, following a 3% decline during 2011.
The shares trade for 1.1 times tangible book value, according to Thomson Reuters Bank Insight, and for eight times the consensus 2013 earnings estimate of $6.62 a share, among analysts polled by Thomson Reuters. The consensus 2014 EPS estimate is $7.04.
Based on a quarterly payout of 40 cents, the shares have a dividend yield of 2.91%.
Barclays analyst Jason Goldberg said in a report on Monday that following the completion of the next round of annual Federal Reserve stress tests late in the first quarter of 2013, he expects PNC to increase the quarterly dividend to 46 cents, while also receiving regulatory approval to repurchase $400 million in common shares. PNC was approved by the Fed to repurchase up to $250 million in shares through the first quarter of 2013, and bought back a total of $135 million in shares during the second and third quarters of 2012.
Goldberg rates PNC "Equal Weight."
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