U.S. Bancorp Stock Is Trailing S&P500 By 17% YTD, What’s Next?

USB: U.S. Bank logo
U.S. Bank

U.S. Bancorp’s stock (NYSE: USB) has lost approximately 6% YTD as compared to the 11% gain in the S&P500 index over the same period. Further, it is currently trading at $41 per share, which is 15% below its fair value of $48 – Trefis’ estimate for U.S. Bancorp’s valuation.

Amid the current financial backdrop, USB stock has seen a decline of 10% from levels of $45 in early January 2021 to around $40 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. Notably, USB stock has underperformed the broader market in each of the last 3 years. Returns for the stock were 21% in 2021, -22% in 2022, and -1% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that USB underperformed the S&P in 2021, 2022, and 2023.  In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could USB face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?

The bank posted mixed results in the first quarter of 2024, with earnings beating the estimates but revenues missing the mark. It reported total revenues of $6.72 billion – down 6% y-o-y, primarily due to a 14% drop in the net interest income (NII), partially offset by an 8% rise in the noninterest revenues. The NII mainly suffered because of a decline in total loans and higher interest rates on deposit mix and pricing. On the cost front, provisions for credit losses rose by 30% y-o-y to $553 million. Further, noninterest expenses as a % of revenues witnessed an unfavorable increase from 63.5% to 66.4% in the quarter. Overall, the adjusted net income decreased 24% y-o-y to $1.2 billion. 

Relevant Articles
  1. Trailing The Broader Index By 24%, Is U.S. Bancorp Stock Ready To Rebound?
  2. What To Expect From U.S. Bancorp Stock?
  3. U.S. Bancorp Stock Is Undervalued
  4. What To Expect From U.S. Bancorp Stock?
  5. Where Is U.S. Bancorp Stock Headed?
  6. Is U.S. Bancorp Stock Attractive At The Current Levels?

The bank’s top line grew 16% y-o-y to $28 billion in FY 2023. While all the segments witnessed positive growth, the bank mainly benefited from a 20% increase in consumer & business banking units followed by a 17% rise in the wealth, corporate, commercial & institutional banking segments. That said, the impact of positive revenue growth was more than offset by a 27% jump in noninterest expense and a 15% increase in the provisions figure. Altogether, the adjusted net income decreased 8% y-o-y to $5.05 billion.

Moving forward, we expect the same trend to continue in the second quarter. Overall, U.S. Bancorp’s revenues are forecast to remain around $27.4 billion in FY2024. Additionally, USB’s annual GAAP EPS is likely to touch $3.83. This coupled with a P/E multiple of just below 13x will lead to a valuation of $48.

 Returns May 2024
MTD [1]
YTD [1]
Total [2]
 USB Return 1% -6% -20%
 S&P 500 Return 5% 11% 137%
 Trefis Reinforced Value Portfolio 7% 7% 657%

[1] Returns as of 5/21/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates