Sterne Agee is initiating coverage of Fulton Financial Corp. FULT with a Buy rating and $13.00 price target. Sterne Agee believes Fulton has a valuable core deposit franchise spanning the Mid-Atlantic region. The Buy rating is based on normalized profitability exceeding peers, the ability to enhance the franchise through acquisitions, and a potential return to a more normalized dividend yield and payout ratio.
Sterne Agee established 2011, 2012, and 2013, operating EPS estimates of $0.65, $0.90, and $1.05. Fulton currently trades at 12.2x Sterne's 2012 operating EPS estimate and 164% of tangible book value. While Fulton's P/E and P/TBV multiples are comparable to the peer group medians of 12.3x and 179%, respectively.
As the valuation focus turns to profitability in the out years and normalized earnings, Sterne Agee compared Fulton to peers based on normalized EPS analysis. Sterne believes average normalized earnings would equal $1.02 and the shares currently trade at 10.8x this normalized EPS estimate as compared to the peer group median of 11.6x.
FULT closed Monday at $11
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