Wunderlich Upgrades Pinnacle Financial Partners To Buy Following Earnings

Wunderlich Securities is pgrading shares of Pinnacle Financial Partners PNFP to Buy from Hold as it raises the price target to $18 from $14 on the heels of improved profitability in 4Q10. Based on improving fundamentals, we value PNFP at $16-$17 per share. The recent wave of M&A activity in which franchises with scarcity value, such as Pinnacle, are acquired at premium levels, implies a value of roughly $19-$20 per PNFP share. Incorporating both of these scenarios, the latter of which must be considered as a viable strategic alternative, suggests a target valuation of $18 per share, which reflects upside potential of more than 20% from current levels. PNFP achieved improved profitability, posting operating EPS of $0.05. This was $0.03 better than our estimate, $0.09 ahead of consensus, and $0.25 better than the lowest estimate on the Street. The story inside the numbers was one of undeniable improvements in asset quality, as practically all asset quality metrics improved sequentially, continuing the trend that began two quarters ago. PNFP closed Wednesday at $14.40