Cullen/Frost Earnings: Net Interest Income Holding Up Well; Loan Growth Is Strong

Narrow-moat-rated Cullen/Frost reported third-quarter results that outperformed expectations. The bank reported EPS of $2.38, ahead of the FactSet consensus of $2.11 and our own estimate of $2.19. Shares had been trending close to our fair value estimate through mid-July but have since traded lower, opening up a valuation gap, in our view. We do not expect a material change in our $122 per share fair value estimate. Even after the positive reaction to today’s earnings, with the stock up 8% as of this writing, we still see room for additional appreciation from here. We continue to view Cullen/Frost as one of the best-managed, lower-risk banks in our coverage.