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Here's What Makes Hilltop Holdings (HTH) Stock Worth Buying Now
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Despite the near-term macroeconomic headwinds, Hilltop Holdings Inc. (HTH - Free Report) looks like a good investment pick right now based on its fundamental strength. Also, the favorable operating backdrop, including higher interest rates and decent loan demand, will continue to support financials. Its strong balance sheet position and business restructuring initiatives are other tailwinds.
Earnings estimates for the company have been witnessing upward revisions, reflecting analysts’ optimism regarding its earnings growth potential. Over the past month, the Zacks Consensus Estimate for Hilltop Holdings’ earnings has been revised 4.9% and 3.9% upward for 2022 and 2023, respectively. The company currently carries a Zacks Rank #2 (Buy).
The stock has rallied 9.5% over the past three months, outperforming the industry’s rise of 6.6%.
Image Source: Zacks Investment Research
6 Reasons That Make HTH Stock an Attractive Investment Option
Earnings Growth: In the last three-five years, the company’s earnings witnessed growth of 28.1%. Though the company is expected to witness a decline in earnings in 2022, the same is expected to rebound and grow 3.5% next year.
Also, the company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 32.78%.
Also, the stock has a Growth Score of A. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Revenue Strength: Hilltop Holdings is focused on its organic growth strategy. While the company’s net interest income (NII) declined in the last two years, the same witnessed a CAGR of 1.4% over the past six years (2016-2021). The uptrend in NII continued in the first nine months of 2022. Robust loans and deposit balances, as well as rising interest rates, are expected to support NII growth in the quarters ahead.
On the assumption of a full-year Fed Fund rate hike of 450-500 bps, management projects NII to increase 5-9% in 2022. Lower paycheck protection program (PPP) and purchase accounting accretion are expected to be headwinds. Further, average loans are expected to rise 1-3% (excluding PPP loans and retained mortgages).
Further, HTH is increasingly focused on improving fee income. Though in the near term, non-interest income growth remains challenging due to several headwinds, the same is expected to improve once the operating backdrop becomes more favorable.
Sound Balance Sheet: As of Sep 30, 2022, HTH had total debt of $1.43 billion and cash and due from banks worth $1.78 billion. The company maintains investment grade ratings of BBB+/Baa2 and a stable outlook from Fitch Ratings and Moody’s Investors Service, respectively. This renders the company favorable access to the debt market. Thus, the company's earnings strength and solid credit profile indicate that it will continue to meet debt obligations in the near term, even if the economic situation worsens.
Business Restructuring Efforts: Hilltop Holdings has grown through business restructuring initiatives. In 2020, the company divested its insurance division – National Lloyds Corporation. Further, since the buyout of PlainsCapital in 2012, the company’s business has expanded tremendously through acquisitions with the consolidation of its position in Texas, Oklahoma, Georgia, Tennessee and Arizona. These deals are not only accretive to earnings but have also helped the company to diversify its operations from core Property & Casualty insurance to a profitable banking operation.
Strong Leverage: Currently, Hilltop Holdings’ debt/equity ratio is zero compared with the industry’s 0.15. This shows that the company will be financially stable, even in adverse economic conditions.
Reasonable Valuation: Hilltop Holdings’ stock looks undervalued right now with respect to its price-to-book (P/B) and price-to-sales (P/S) ratios. It has a P/B ratio of 0.93, lower than the industry average of 1.33. Moreover, the company’s P/S ratio of 1.29 is below the industry average of 2.94.
The Zacks Consensus Estimate for Hancock Whitney’s 2022 earnings has moved marginally upward over the past 30 days. So far this year, HWC’s shares have gained 8.3%.
The Zacks Consensus Estimate for F.N.B. Corp’s 2022 has remained unchanged over the past 30 days. FNB’s shares have rallied 15.5% in the year-to-date period.
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Here's What Makes Hilltop Holdings (HTH) Stock Worth Buying Now
Despite the near-term macroeconomic headwinds, Hilltop Holdings Inc. (HTH - Free Report) looks like a good investment pick right now based on its fundamental strength. Also, the favorable operating backdrop, including higher interest rates and decent loan demand, will continue to support financials. Its strong balance sheet position and business restructuring initiatives are other tailwinds.
Earnings estimates for the company have been witnessing upward revisions, reflecting analysts’ optimism regarding its earnings growth potential. Over the past month, the Zacks Consensus Estimate for Hilltop Holdings’ earnings has been revised 4.9% and 3.9% upward for 2022 and 2023, respectively. The company currently carries a Zacks Rank #2 (Buy).
The stock has rallied 9.5% over the past three months, outperforming the industry’s rise of 6.6%.
Image Source: Zacks Investment Research
6 Reasons That Make HTH Stock an Attractive Investment Option
Earnings Growth: In the last three-five years, the company’s earnings witnessed growth of 28.1%. Though the company is expected to witness a decline in earnings in 2022, the same is expected to rebound and grow 3.5% next year.
Also, the company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 32.78%.
Also, the stock has a Growth Score of A. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Revenue Strength: Hilltop Holdings is focused on its organic growth strategy. While the company’s net interest income (NII) declined in the last two years, the same witnessed a CAGR of 1.4% over the past six years (2016-2021). The uptrend in NII continued in the first nine months of 2022. Robust loans and deposit balances, as well as rising interest rates, are expected to support NII growth in the quarters ahead.
On the assumption of a full-year Fed Fund rate hike of 450-500 bps, management projects NII to increase 5-9% in 2022. Lower paycheck protection program (PPP) and purchase accounting accretion are expected to be headwinds. Further, average loans are expected to rise 1-3% (excluding PPP loans and retained mortgages).
Further, HTH is increasingly focused on improving fee income. Though in the near term, non-interest income growth remains challenging due to several headwinds, the same is expected to improve once the operating backdrop becomes more favorable.
Sound Balance Sheet: As of Sep 30, 2022, HTH had total debt of $1.43 billion and cash and due from banks worth $1.78 billion. The company maintains investment grade ratings of BBB+/Baa2 and a stable outlook from Fitch Ratings and Moody’s Investors Service, respectively. This renders the company favorable access to the debt market. Thus, the company's earnings strength and solid credit profile indicate that it will continue to meet debt obligations in the near term, even if the economic situation worsens.
Business Restructuring Efforts: Hilltop Holdings has grown through business restructuring initiatives. In 2020, the company divested its insurance division – National Lloyds Corporation. Further, since the buyout of PlainsCapital in 2012, the company’s business has expanded tremendously through acquisitions with the consolidation of its position in Texas, Oklahoma, Georgia, Tennessee and Arizona. These deals are not only accretive to earnings but have also helped the company to diversify its operations from core Property & Casualty insurance to a profitable banking operation.
Strong Leverage: Currently, Hilltop Holdings’ debt/equity ratio is zero compared with the industry’s 0.15. This shows that the company will be financially stable, even in adverse economic conditions.
Reasonable Valuation: Hilltop Holdings’ stock looks undervalued right now with respect to its price-to-book (P/B) and price-to-sales (P/S) ratios. It has a P/B ratio of 0.93, lower than the industry average of 1.33. Moreover, the company’s P/S ratio of 1.29 is below the industry average of 2.94.
Also, the stock has a Value Score of A.
Other Key Bank Picks
A couple of other bank stocks worth a look are Hancock Whitney Corporation (HWC - Free Report) and F.N.B. Corporation (FNB - Free Report) . At present, both HWC and FNB carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Hancock Whitney’s 2022 earnings has moved marginally upward over the past 30 days. So far this year, HWC’s shares have gained 8.3%.
The Zacks Consensus Estimate for F.N.B. Corp’s 2022 has remained unchanged over the past 30 days. FNB’s shares have rallied 15.5% in the year-to-date period.