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Why Is Huntington Bancshares (HBAN) Down 6.8% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Huntington Bancshares Incorporated (HBAN - Free Report) . Shares have lost about 6.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as 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.
Huntington Q2 Earnings Beat Estimates, Revenues Up
Huntington reported a positive earnings surprise of 13.0% in second-quarter 2017. Adjusted earnings per share of $0.26 outpaced the Zacks Consensus Estimate by $0.03. Moreover, the figure was higher than the prior-year quarter adjusted earnings of $0.21. The reported earnings exclude FirstMerit acquisition-related expenses of $0.03 per share.
The company’s results witnessed higher revenues and continual growth in both loan and deposit balances. Notably, the reported results highlight the benefit of the FirstMerit acquisition. However, elevated expenses and higher net charge-offs were the primary headwinds.
Net income jumped nearly 55.4% year over year to $272 million during the quarter.
Revenues, Loans & Deposits Escalate, Expenses Flare Up
Huntington Bancshares’ total revenue on a fully taxable-equivalent (FTE) basis was $1.08 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.07 billion. Moreover, total revenue was up 37% year over year.
Net interest income (NII) came in at $757 million on a FTE basis, up 47% from the prior-year quarter. The rise was driven by an increase in average earnings assets, along with an expansion of 25 basis points (bps) in NIM, to 3.31%.
Non-interest income climbed 20% year over year to $325 million. The upsurge was due to growth in almost all components of income.
Non-interest expense surged 33% year over year to $694 million. The increase stemmed from rise in mostly all components of expenses. Excluding the impact of certain non-recurring items, non-interest expenses increased 28% year over year.
As of Jun 30, 2017, average loans and leases at Huntington Bancshares jumped nearly 29.7% year over year to $67.3 billion. Also, average total deposits surged 38% year over year to $76.5 billion.
Credit Quality: A Mixed Bag
Net charge-offs were $36 million or an annualized 0.21% of average total loans in the reported quarter, up from $17 million or an annualized 0.13% in the year-ago quarter.
Provision for credit losses was stable on a year-over year basis at $25 million. In addition, total non-performing assets totaled $415 million as of Jun 30, 2017, down from $490 million as of Jun 30, 2016.
The quarter-end allowance for credit losses, as a percentage of total loans and leases, dropped to 1.11% from 1.33% in the prior-year quarter.
Strong Capital Ratios
Huntington Bancshares capital ratios were strong.
Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.88% and 11.24%, respectively compared with 9.80% and 11.37% in the year-ago quarter.
Tangible common equity to tangible assets ratio was 7.41%, down from 7.96% as of Jun 30, 2016.
Outlook for 2017
Including the synergies of FirstMerit acquisition, total revenue for full-year 2017 is expected to be over 20%. Management projects to implement all FirstMerit-related cost savings by third-quarter 2017.
Average balance sheet growth is estimated over 20%, driven mainly due to the FirstMerit acquisition. On a period-end basis, loan growth is anticipated in the range of 4–6%.
Overall, asset quality metrics are likely to remain stable with moderate quarterly volatility, given the current low level of problem assets and credit costs.
Management anticipates NCOs to remain below the long-term normalized range of 35–55 basis points, while provision expenses are expected to continue normalizing.
Excluding certain items, the effective tax rate for 2017 is estimated in the range of 24–27%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There have been two revisions higher for the current quarter compared to two lower. While looking back an additional 30 days, we can see even more upward momentum.
Huntington Bancshares Incorporated Price and Consensus
At this time, the stock has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. Following the exact same course, the stock was allocated also a grade of B on the value side, putting it in the top 40% 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.
Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.
Outlook
Shares of Huntington Bancshares have a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Why Is Huntington Bancshares (HBAN) Down 6.8% Since the Last Earnings Report?
It has been about a month since the last earnings report for Huntington Bancshares Incorporated (HBAN - Free Report) . Shares have lost about 6.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as 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.
Huntington Q2 Earnings Beat Estimates, Revenues Up
Huntington reported a positive earnings surprise of 13.0% in second-quarter 2017. Adjusted earnings per share of $0.26 outpaced the Zacks Consensus Estimate by $0.03. Moreover, the figure was higher than the prior-year quarter adjusted earnings of $0.21. The reported earnings exclude FirstMerit acquisition-related expenses of $0.03 per share.
The company’s results witnessed higher revenues and continual growth in both loan and deposit balances. Notably, the reported results highlight the benefit of the FirstMerit acquisition. However, elevated expenses and higher net charge-offs were the primary headwinds.
Net income jumped nearly 55.4% year over year to $272 million during the quarter.
Revenues, Loans & Deposits Escalate, Expenses Flare Up
Huntington Bancshares’ total revenue on a fully taxable-equivalent (FTE) basis was $1.08 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.07 billion. Moreover, total revenue was up 37% year over year.
Net interest income (NII) came in at $757 million on a FTE basis, up 47% from the prior-year quarter. The rise was driven by an increase in average earnings assets, along with an expansion of 25 basis points (bps) in NIM, to 3.31%.
Non-interest income climbed 20% year over year to $325 million. The upsurge was due to growth in almost all components of income.
Non-interest expense surged 33% year over year to $694 million. The increase stemmed from rise in mostly all components of expenses. Excluding the impact of certain non-recurring items, non-interest expenses increased 28% year over year.
As of Jun 30, 2017, average loans and leases at Huntington Bancshares jumped nearly 29.7% year over year to $67.3 billion. Also, average total deposits surged 38% year over year to $76.5 billion.
Credit Quality: A Mixed Bag
Net charge-offs were $36 million or an annualized 0.21% of average total loans in the reported quarter, up from $17 million or an annualized 0.13% in the year-ago quarter.
Provision for credit losses was stable on a year-over year basis at $25 million. In addition, total non-performing assets totaled $415 million as of Jun 30, 2017, down from $490 million as of Jun 30, 2016.
The quarter-end allowance for credit losses, as a percentage of total loans and leases, dropped to 1.11% from 1.33% in the prior-year quarter.
Strong Capital Ratios
Huntington Bancshares capital ratios were strong.
Common equity tier 1 risk-based capital ratio and regulatory Tier 1 risk-based capital ratio were 9.88% and 11.24%, respectively compared with 9.80% and 11.37% in the year-ago quarter.
Tangible common equity to tangible assets ratio was 7.41%, down from 7.96% as of Jun 30, 2016.
Outlook for 2017
Including the synergies of FirstMerit acquisition, total revenue for full-year 2017 is expected to be over 20%. Management projects to implement all FirstMerit-related cost savings by third-quarter 2017.
Average balance sheet growth is estimated over 20%, driven mainly due to the FirstMerit acquisition. On a period-end basis, loan growth is anticipated in the range of 4–6%.
Overall, asset quality metrics are likely to remain stable with moderate quarterly volatility, given the current low level of problem assets and credit costs.
Management anticipates NCOs to remain below the long-term normalized range of 35–55 basis points, while provision expenses are expected to continue normalizing.
Excluding certain items, the effective tax rate for 2017 is estimated in the range of 24–27%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There have been two revisions higher for the current quarter compared to two lower. While looking back an additional 30 days, we can see even more upward momentum.
Huntington Bancshares Incorporated Price and Consensus
Huntington Bancshares Incorporated Price and Consensus | Huntington Bancshares Incorporated Quote
VGM Scores
At this time, the stock has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. Following the exact same course, the stock was allocated also a grade of B on the value side, putting it in the top 40% 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.
Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.
Outlook
Shares of Huntington Bancshares have a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.