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Hancock Whitney (HWC) Up 22.3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Hancock Whitney (HWC - Free Report) . Shares have added about 22.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Hancock Whitney due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Hancock Whitney Q3 Earnings & Revenues Beat Estimates, Costs Decline

Hancock Whitney’s third-quarter 2020 earnings per share of 90 cents handily surpassed the Zacks Consensus Estimate of 68 cents. However, the figure compared unfavorably with the prior-year quarter’s adjusted number of $1.03.

Results reflected a rise in revenues and lower operating expenses. However, decline in loans and deposits balances as well as higher provisions were the undermining factors.

Net income available to common shareholders was $77.9 million, up 16.9% year over year.

Revenues Improve, Expenses Down

Total revenues were $318.9 million, up 4.2% year over year. Also, the figure beat the Zacks Consensus Estimate of $316.8 million.

Net interest income on tax equivalent basis grew 5.2% year over year to $238.4 million. However, NIM, on a tax-equivalent basis, came in at 3.23%, contracting 18 basis points (bps).

Non-interest income was $83.7 million, up marginally from the year-ago level. The rise was primarily driven by a substantial increase in secondary mortgage market operations income.

Total non-interest expenses declined 8.3% to $195.8 million, mainly due to lower other operating expenses.

As of Sep 30, 2020, total loans were $22.2 billion, down 1.7% from the prior-quarter end. Also, total deposits declined 1.1% to $27 billion.

Credit Quality: Mixed Bag

Provision for credit losses jumped significantly from $12.4 million in the year-ago quarter to $25 million.

However, net charge-offs (NCOs) (annualized) were 0.43% of average total loans, down 40 bps from the year-ago quarter. Further, total non-performing assets plunged 38.9% to $192.2 million.

Capital Ratios Deteriorate

As of Sep 30, 2020, Tier 1 leverage ratio was 7.70%, down from 9.49% at the end of the year-earlier quarter. Tier 1 risk-based capital ratio was 10.29%, down from 11.02% as of Sep 30, 2019.

Outlook

Management expects loan growth to be tempered for the remainder of the year and thus, total loan balance is projected to decline in the fourth quarter.

Payment Protection Program (PPP) loans are expected to remain relatively stable in 2020 and then begin to significantly decline in the first quarter of 2021.
Provisions are likely to be stable sequentially and match NCOs in the fourth quarter.

Fourth-quarter 2020 NIM is expected to remain relatively flat.

Operating expenses are expected to decline in the fourth quarter, driven by expense-control measures being taken by the company.

The company expects tangible common equity ratio of 8% for 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 14.18% due to these changes.

VGM Scores

Currently, Hancock Whitney has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Hancock Whitney has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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