It has been about a month since the last earnings report for Hancock Holding Company . Shares have added about 2.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Hancock Tops on Q1 Earnings, Revenues Surge
Hancock reported first-quarter 2017 adjusted earnings of $0.63 per share, surpassing the Zacks Consensus Estimate of $0.57. Further, this compares favorably with the prior-year quarter adjusted earnings of $0.54.
The better-than-expected results were primarily driven by a year-over-year improvement in the top line. Growth in loans and deposits remained strong. Further, an improvement in profitability and capital ratios were on the positive side. Additionally, an energy-led fall in provisions helped release the burden to some extent. However, higher expenses and a rise in non-performing assets remained the undermining factors.
Results excluded several one-time items. After considering these, net income for the quarter came in at $49 million or $0.57 per share, significantly up from $3.8 million or $0.05 per share in the prior-year quarter.
Revenue Growth Supports Improved Results
Hancock’s net revenue for the quarter totaled $245.2 million, up 10.9% year over year. Revenues came in line with the Zacks Consensus Estimate.
Quarterly net interest income grew 11.6% year over year to $181.7 million. Also, reported net interest margin (NIM) rose 14 basis points from the prior-year quarter to 3.37%.
Non-interest income totaled $63.5 million, up 9.1% from the year-ago quarter. The growth was driven by an improvement in all the components, except trust fees, insurance commissions and fees, securities transaction fees and other income.
Total operating expenses increased 4.8% year over year to $163.5 million. The rise was primarily due to higher personnel, net occupancy expenses and other operating expenses.
Credit Quality: A Mixed Bag
Net charge-offs from the non-covered loan portfolio was 0.70% of average total loans, up from 0.54% in the year-ago quarter. Also, total nonperforming assets increased 6.6% year over year to $327.1 million. However, provision for loan losses declined 73.4% year over year to roughly $16 million, thanks to the rebound in oil prices.
Strong Balance Sheet; Improved Profitability & Capital Ratios
As of Mar 31, 2017, total loans grew 8.7% sequentially to $18.2 billion. Further, total deposits rose 2.6% from the prior month to $19.9 billion.
Return on average assets was 0.80%, up from 0.07% as of Mar 31, 2016. Moreover, as of Mar 31, 2017, return on average common equity was 7.27% compared with 0.64% as of Mar 31, 2016.
As of Mar 31, 2017, Tier 1 leverage ratio was 8.79%, up from 8.14% as of Mar 31, 2016. Further, Tier 1 risk-based capital ratio came in at 10.24%, up from 9.69% as of Mar 31, 2016.
Outlook for Second-Quarter 2017
The company expects the First NBC transaction to generate operating income of nearly $9-11 million or $0.10¬-$0.12 per share (excluding the acquisition and merger-related costs, which is expected to be around $5 million)
Management expects net loan growth of $250-$300 million.
On the assumption of no further rate hikes, the company expects core NIM to expand 5-7 bps. The figure includes the full quarter impact of the March rate hike and the First NBC transaction.
On the cost front, the company expects expenses to increase $3-$4 million due to annual employee raises and higher level of First NBC branch costs.
Further, loan loss provisions are anticipated to be around $14-$16 million.
Outlook for 2017
Including the impact of the First NBC transaction, management expects loan growth to be 15.
The company expects revenue growth of nearly 11 including the impact of the March rate hike. Also, core pre provision net revenue growth is likely to be nearly 20-22%.
Expenses are expected to rise 4.
Excluding any significant changes in the tax code, the company expects effective tax rate to be in the range of 25.
Further, management estimates charge-offs from energy related credits to be roughly in the range of $65-$95 million. The company expects additional charge-offs in the energy portfolio, though it believes these will be manageable. Also, provision for loan and lease losses are anticipated to be around $50-65 million.
Moreover, the company expects to have strong capital position along with sufficient reserves.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
VGM Scores
At this time, Hancock Holding's stock has a nice Growth Score of 'B', while it is lagging a lot on the momentum front with 'D'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Hancock (HBHC) Up 2.1% Since the Last Earnings Report?
It has been about a month since the last earnings report for Hancock Holding Company . Shares have added about 2.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Hancock Tops on Q1 Earnings, Revenues Surge
Hancock reported first-quarter 2017 adjusted earnings of $0.63 per share, surpassing the Zacks Consensus Estimate of $0.57. Further, this compares favorably with the prior-year quarter adjusted earnings of $0.54.
The better-than-expected results were primarily driven by a year-over-year improvement in the top line. Growth in loans and deposits remained strong. Further, an improvement in profitability and capital ratios were on the positive side. Additionally, an energy-led fall in provisions helped release the burden to some extent. However, higher expenses and a rise in non-performing assets remained the undermining factors.
Results excluded several one-time items. After considering these, net income for the quarter came in at $49 million or $0.57 per share, significantly up from $3.8 million or $0.05 per share in the prior-year quarter.
Revenue Growth Supports Improved Results
Hancock’s net revenue for the quarter totaled $245.2 million, up 10.9% year over year. Revenues came in line with the Zacks Consensus Estimate.
Quarterly net interest income grew 11.6% year over year to $181.7 million. Also, reported net interest margin (NIM) rose 14 basis points from the prior-year quarter to 3.37%.
Non-interest income totaled $63.5 million, up 9.1% from the year-ago quarter. The growth was driven by an improvement in all the components, except trust fees, insurance commissions and fees, securities transaction fees and other income.
Total operating expenses increased 4.8% year over year to $163.5 million. The rise was primarily due to higher personnel, net occupancy expenses and other operating expenses.
Credit Quality: A Mixed Bag
Net charge-offs from the non-covered loan portfolio was 0.70% of average total loans, up from 0.54% in the year-ago quarter. Also, total nonperforming assets increased 6.6% year over year to $327.1 million. However, provision for loan losses declined 73.4% year over year to roughly $16 million, thanks to the rebound in oil prices.
Strong Balance Sheet; Improved Profitability & Capital Ratios
As of Mar 31, 2017, total loans grew 8.7% sequentially to $18.2 billion. Further, total deposits rose 2.6% from the prior month to $19.9 billion.
Return on average assets was 0.80%, up from 0.07% as of Mar 31, 2016. Moreover, as of Mar 31, 2017, return on average common equity was 7.27% compared with 0.64% as of Mar 31, 2016.
As of Mar 31, 2017, Tier 1 leverage ratio was 8.79%, up from 8.14% as of Mar 31, 2016. Further, Tier 1 risk-based capital ratio came in at 10.24%, up from 9.69% as of Mar 31, 2016.
Outlook for Second-Quarter 2017
The company expects the First NBC transaction to generate operating income of nearly $9-11 million or $0.10¬-$0.12 per share (excluding the acquisition and merger-related costs, which is expected to be around $5 million)
Management expects net loan growth of $250-$300 million.
On the assumption of no further rate hikes, the company expects core NIM to expand 5-7 bps. The figure includes the full quarter impact of the March rate hike and the First NBC transaction.
On the cost front, the company expects expenses to increase $3-$4 million due to annual employee raises and higher level of First NBC branch costs.
Further, loan loss provisions are anticipated to be around $14-$16 million.
Outlook for 2017
Including the impact of the First NBC transaction, management expects loan growth to be 15.
The company expects revenue growth of nearly 11 including the impact of the March rate hike. Also, core pre provision net revenue growth is likely to be nearly 20-22%.
Expenses are expected to rise 4.
Excluding any significant changes in the tax code, the company expects effective tax rate to be in the range of 25.
Further, management estimates charge-offs from energy related credits to be roughly in the range of $65-$95 million. The company expects additional charge-offs in the energy portfolio, though it believes these will be manageable. Also, provision for loan and lease losses are anticipated to be around $50-65 million.
Moreover, the company expects to have strong capital position along with sufficient reserves.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
Hancock Holding Company Price and Consensus
Hancock Holding Company Price and Consensus | Hancock Holding Company Quote
VGM Scores
At this time, Hancock Holding's stock has a nice Growth Score of 'B', while it is lagging a lot on the momentum front with 'D'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.