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Hancock Whitney (HWC) Up 10.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Hancock Whitney (HWC - Free Report) . Shares have added about 10.3% 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 its most recent earnings report in order to get a better handle on the important drivers.

Hancock Whitney Q1 Earnings & Revenue Beat Estimates

Hancock Whitney’s first-quarter 2021 earnings per share of $1.21 surpassed the Zacks Consensus Estimate of 97 cents. Also, the figure shows significant improvement from the prior-year quarter’s loss of $1.28.

Results benefitted from an increase in revenues, lower expenses and provision benefits. Moreover, deposit balance climbed during the quarter. However, lower interest rates and soft loan demand were headwinds.

Net income came in at $107.2 million against the net loss of $111 million seen in the prior-year quarter.

Revenues Improve, Expenses Decline

Total revenues were $321.7 million, up 1.9% year over year. Also, the figure beat the Zacks Consensus Estimate of $310.2 million.

Net interest income (NII) on a tax-equivalent basis inched up 1.2% year on year to $237.5 million. Yet, net interest margin (NIM) (on a tax-equivalent basis) was 3.09%, contracting 32 basis points (bps).

Non-interest income was $87.1 million, up 3.2% from the year-ago level. This upswing was primarily driven by a rise in almost all fee income components, except for service charges on deposit account and other income.

Total non-interest expenses declined 5% year over year to $193.1 million mainly due to a fall in net occupancy and equipment expense, net other real estate and foreclosed assets expense other operating expenses and amortization of intangibles.

As of Mar 31, 2021, total loans were $21.7 billion, down marginally from the prior-quarter end. Total deposits were up 5.5% sequentially to $29.2 billion.

Credit Quality Improve

Provision for loan losses was a benefit of $4.9 million against a provision of $246.8 million in the prior-year quarter. Also, net charge-offs (annualized) were 0.34% of average total loans, down 49 bps from the year-ago quarter.

Further, total non-performing assets plummeted 59.5% from the prior-year quarter end to $124.2 million.

Capital Ratios Mixed

As of Mar 31, 2021, Tier 1 leverage ratio was 7.89%, down from 8.40% at the end of the year-earlier quarter. Tier 1 risk-based capital ratio was 11.02%, up from 10.02% as of Mar 31, 2020.

Second-Quarter 2021 Outlook

Management expects core loans to remain stable, as opportunities for new organic growth remain low in light of the slow economic environment. The company also expects up to $800 million worth of paycheck protection program (PPP) loans to forgiven, which might lead to a decline in the overall loan balance.

Total deposits are expected to be flat or slightly down.

The company projects continued NIM contraction of nearly 10-15 bps, while the NII is likely to remain relatively stable or down $2-$4 million.

Further, fee income is expected to be flat or slightly down.

Management expects provision levels to be similar to first-quarter 2021.

Non-interest expenses (excluding one-time early retirement costs) are expected to be flat or modestly up.

Effective tax rate is anticipated to be 19-20%.

Full-Year 2021 Outlook

Management expects total core loans to be up $700-$800 million in the second half of 2021 and end the year at nearly $20.1 billion. Additionally, total deposits are expected to be down $500-$600 million in second half and end the year at roughly $28.6 billion.

NIM is expected to bottom out in the second quarter and remain relatively stable in the second half of the year.

NII is anticipated to be down 1-2%, mainly due to lower rates, PPP forgiveness and limited loan growth. Management projects majority of PPP loans to be forgiven by 2021-end, which will result in a total remaining balance in the range of $300-$525 million.

Fee income is expected to rise 4-6% as improvements in most fee categories are likely to be partially offset by lower NSF/OD and secondary mortgage fees.

On assumptions of economic improvement, continuation of vaccination levels and no new COVID-19 surges or lockdowns, management anticipates negative provisioning to continue and possibly increase in the second half.

Non-interest expenses (excluding one-time early retirement costs) are expected to be down 2-3%, with fourth-quarter 2021 expense level of $187 million, a run-rate for 2022 overall expenses.

Effective tax rate is anticipated to be 19-20%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 24.92% due to these changes.

VGM Scores

Currently, Hancock Whitney has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Hancock Whitney has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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