US Bancorp (USB) has for some time been a favoured stock among institutional investors. In fact, around 68% of the company’s shares are owned by institutions and within that, Warren Buffet’s Berkshire Hathaway (BRK) is the largest shareholder with just over 8%.
Other notable shareholder names include BlackRock (BLK) and The Vanguard Group. Having a large amount of institutional money invested in a company is often regarded as a good thing for a company. But all is not completely rosy in the USB garden right now. Institutional investors endured heavy losses after the company’s share price fell by 8.2% last week.
In fact, the USB stock price has now hit a 52-week low. In early January the stock was around the $63 level but now languishes around $41.
This begs the question is the company a bargain buy right now?
The danger with institutions holding such a high percentage of shares in USB is that they can massively impact the price dynamics of the stock.
Essentially if the stock decline continues – they may feel forced to sell. This is not good news for existing individual investors but possibly a trigger point for new investors?
The question for existing and potential investors in USB is ‘is there much wrong with the company?’
USB’s current net profit margins (28.4%) are lower than last year (31%). While USB saw a healthy bounce in 2021 – from end of December 2021 onwards both revenue and earnings have fallen.
The banking sector in general has been through a volatile period – pandemic and post-pandemic. Arguably those with investment banking features such as trading, and M&A advising were in a better position. USB is more associated with commercial banking.
USB will release its third quarter 2022 earnings results on Friday 14 October, so market watchers will be keen to see what numbers they produce.
There is no indication so far that institutional investors will offload USB shares in any great number – assuming the latest trading numbers are not too alarming.
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Shape of the business
As a business model, USB ticks a good few boxes. For the eighth-consecutive year, it was named one of the World’s Most Ethical Companies by the Ethisphere Institute.
USB is currently ranked 17 in the DiversityInc Top 50 list again this year – highlighting good practice in diversity and philanthropy.
USB has also expanded, in September 2021, it agreed to purchase MUFG Union Bank’s consumer business for $8bn.
What is broker sentiment currently towards USB?
Simply Wall St thinks the bank – currently priced around $41 – is below fair value by more than 20%.
The consensus rating at Marketbeat for USB is ‘hold’ with a consensus price target of $58.56.
Of 15 analysts, nine rate the stock a ‘hold’; five a ‘buy’; and one a ‘sell’.
Further reading
Source: capital.com
