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Hancock Whitney (HWC) Up 18.3% 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 18.3% 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 Beat Estimates, Revenues Down
Hancock Whitney’s third-quarter 2023 earnings of $1.12 per share outpaced the Zacks Consensus Estimate of $1.02. However, the bottom line reflects a year-over-year decline of 27.7%.
Results were positively impacted by a marginal rise in non-interest income. The loan balance witnessed a slight sequential rise, which was another positive. However, lower net interest income, higher expenses and significantly higher provisions were major headwinds.
Net income was $97.7 million, decreasing 27.8% year over year. Our estimate for the metric was $93 million.
Revenues Decline, Expenses Rise
Total revenues amounted to $355.2 million, down 2.9% year over year. The top line marginally lagged the Zacks Consensus Estimate of $355.7 million.
NII (on a tax-equivalent basis) declined 3.8% year over year to $272.1 million. The net interest margin was 3.27%, which contracted 27 basis points. Our estimate for NII was $268.3 million. We had projected a NIM of 3.24% for the third quarter.
Non-interest income was $86 million, which increased marginally from the year-ago quarter. The rise was largely driven by increased trust fees, investment and annuity fees and insurance commissions, and other income. Our estimate for non-interest income was $85.4 million.
Total non-interest expenses increased 5.8% year over year to $204.7 million. We had projected expenses of $205 million.
The efficiency ratio increased to 56.38% from 51.62% in the year-ago quarter. A rise in the efficiency ratio reflects lower profitability.
As of Sep 30, 2023, total loans were $24 billion, up marginally from the prior quarter’s end. Total deposits also increased marginally on a sequential basis to $30.3 billion. Our estimates for total loans and deposits were $23.6 billion and $29.3 billion, respectively.
Credit Quality Worsens
The provision for credit losses was $28.5 million, rising significantly from the prior-year quarter. Our estimate for provisions was $27.1 million. Net charge-offs (annualized) were 0.64% of average total loans, up from 0.02% in the prior-year quarter.
Capital Ratios Improve, Profitability Ratios Worsen
As of Sep 30, 2023, the Tier 1 leverage ratio was 10.01%, up from 9.27% at the end of the year-earlier quarter. The common equity Tier 1 ratio was 12.04%, up from 11.10% as of Sep 30, 2022.
At the end of the third quarter, the return on average assets was 1.09%, down from the year-ago period’s 1.56%. The return on average common equity was 10.85%, down from 15.77% in the prior-year quarter.
Share Repurchase Update
In the reported quarter, the company did not repurchase any shares.
Fourth Quarter 2023 Outlook
Management projects loans to grow modestly from the prior quarter.
Deposit balance is likely to improve marginally on a sequential basis.
NIM is expected to compress 3-5 bps in the fourth quarter of 2023 on the assumption that there will be no rate hike in the quarter. Deposit costs are expected to be up 18 bps sequentially.
Non-interest income is anticipated to be marginally down sequentially.
Operating pre-provision net revenues (PPNR) are projected to be down slightly from the third quarter.
Operating expenses are expected to be down sequentially.
2023 Outlook
Management expects total loans to grow in the low to mid-single-digit range. Looking forward, the company expects further moderation in its loan growth that will be driven by selective appetite in CRE, potential economic slowdown and disciplined loan pricing.
The company expects total deposit growth to be in the flat to low-single-digit range.
Operating PPNR is expected to decrease 1-3%.
Non-interest income is expected to be up 1-2%.
Operating expenses are anticipated to be up 7.5-8.5%. The guidance excludes any expected special FDIC assessment costs related to the bank failures.
Management expects the efficiency ratio to remain below 56%.
Hancock Whitney expects low to modest charge-offs and provisions for the remainder of 2023.
The company expects an effective tax rate of 21%.
Three-Year Corporate Strategic Objectives (to be Achieved by fourth quarter 2025)
Return on assets of more than 1.55% is expected.
Tangible common equity (TCE) of more than 8% is anticipated.
Return on TCE is expected to be more than 18%.
An efficiency ratio of less than or equal to 50% is targeted.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Hancock Whitney has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, 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
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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Hancock Whitney (HWC) Up 18.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Hancock Whitney (HWC - Free Report) . Shares have added about 18.3% 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 Beat Estimates, Revenues Down
Hancock Whitney’s third-quarter 2023 earnings of $1.12 per share outpaced the Zacks Consensus Estimate of $1.02. However, the bottom line reflects a year-over-year decline of 27.7%.
Results were positively impacted by a marginal rise in non-interest income. The loan balance witnessed a slight sequential rise, which was another positive. However, lower net interest income, higher expenses and significantly higher provisions were major headwinds.
Net income was $97.7 million, decreasing 27.8% year over year. Our estimate for the metric was $93 million.
Revenues Decline, Expenses Rise
Total revenues amounted to $355.2 million, down 2.9% year over year. The top line marginally lagged the Zacks Consensus Estimate of $355.7 million.
NII (on a tax-equivalent basis) declined 3.8% year over year to $272.1 million. The net interest margin was 3.27%, which contracted 27 basis points. Our estimate for NII was $268.3 million. We had projected a NIM of 3.24% for the third quarter.
Non-interest income was $86 million, which increased marginally from the year-ago quarter. The rise was largely driven by increased trust fees, investment and annuity fees and insurance commissions, and other income. Our estimate for non-interest income was $85.4 million.
Total non-interest expenses increased 5.8% year over year to $204.7 million. We had projected expenses of $205 million.
The efficiency ratio increased to 56.38% from 51.62% in the year-ago quarter. A rise in the efficiency ratio reflects lower profitability.
As of Sep 30, 2023, total loans were $24 billion, up marginally from the prior quarter’s end. Total deposits also increased marginally on a sequential basis to $30.3 billion. Our estimates for total loans and deposits were $23.6 billion and $29.3 billion, respectively.
Credit Quality Worsens
The provision for credit losses was $28.5 million, rising significantly from the prior-year quarter. Our estimate for provisions was $27.1 million. Net charge-offs (annualized) were 0.64% of average total loans, up from 0.02% in the prior-year quarter.
Capital Ratios Improve, Profitability Ratios Worsen
As of Sep 30, 2023, the Tier 1 leverage ratio was 10.01%, up from 9.27% at the end of the year-earlier quarter. The common equity Tier 1 ratio was 12.04%, up from 11.10% as of Sep 30, 2022.
At the end of the third quarter, the return on average assets was 1.09%, down from the year-ago period’s 1.56%. The return on average common equity was 10.85%, down from 15.77% in the prior-year quarter.
Share Repurchase Update
In the reported quarter, the company did not repurchase any shares.
Fourth Quarter 2023 Outlook
Management projects loans to grow modestly from the prior quarter.
Deposit balance is likely to improve marginally on a sequential basis.
NIM is expected to compress 3-5 bps in the fourth quarter of 2023 on the assumption that there will be no rate hike in the quarter. Deposit costs are expected to be up 18 bps sequentially.
Non-interest income is anticipated to be marginally down sequentially.
Operating pre-provision net revenues (PPNR) are projected to be down slightly from the third quarter.
Operating expenses are expected to be down sequentially.
2023 Outlook
Management expects total loans to grow in the low to mid-single-digit range. Looking forward, the company expects further moderation in its loan growth that will be driven by selective appetite in CRE, potential economic slowdown and disciplined loan pricing.
The company expects total deposit growth to be in the flat to low-single-digit range.
Operating PPNR is expected to decrease 1-3%.
Non-interest income is expected to be up 1-2%.
Operating expenses are anticipated to be up 7.5-8.5%. The guidance excludes any expected special FDIC assessment costs related to the bank failures.
Management expects the efficiency ratio to remain below 56%.
Hancock Whitney expects low to modest charge-offs and provisions for the remainder of 2023.
The company expects an effective tax rate of 21%.
Three-Year Corporate Strategic Objectives (to be Achieved by fourth quarter 2025)
Return on assets of more than 1.55% is expected.
Tangible common equity (TCE) of more than 8% is anticipated.
Return on TCE is expected to be more than 18%.
An efficiency ratio of less than or equal to 50% is targeted.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Hancock Whitney has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, 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
Hancock Whitney has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.