A month has gone by since the last earnings report for Hilltop Holdings Inc. (HTH - Free Report) . Shares have lost about 2.1% 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.
Hilltop Holdings Misses on Q4 Earnings, Expenses Up
Hilltop Holdings Inc. reported fourth-quarter 2016 operating earnings per share of $0.36, which lagged the Zacks Consensus Estimate of $0.47. However, the reported figure represents an increase of 71.4% year over year.
Higher expenses and a rise in provision for loan losses were primarily responsible for the lower-than-expected results. However, the company witnessed an improvement in revenues during the quarter. Further, the balance sheet remained strong.
Net income applicable to common stockholders came in at $35.2 million, up 70.4% year over year. Fourth-quarter results included a specific legal reserve of $16.0 million.
Moreover, the company reported full-year operating earnings per share of $1.48, missing the Zacks Consensus Estimate of $1.72. Further, the figure was down 29.2% year over year. Net income applicable to common shareholders for 2016 came in at $145.9 million, compared with $209.1 million recorded a year ago. Included in 2015’s figure was a bargain purchase gain related to the acquisition of SWS Group, Inc.
Revenues and Expenses Up
The company’s operating revenues for the quarter were $413 million, up 9.8% year over year. However, the figure fell short of the Zacks Consensus Estimate of $424 million.
For 2016, revenues came in at $1.68 billion, surpassing the Zacks Consensus Estimate of $1.65 billion. Also, the figure was up 2.45% year over year.
Net interest income for the quarter increased 4.8% year over year to $104.1 million. Net interest margin was 3.80% at the end of the quarter, up 10 basis points (bps) from the prior-year quarter.
Non-interest income increased 11.6% year over year to $309.1 million.
Non-interest expenses increased 5% year over year to $355.8 million due to higher employees’ compensation and benefits, and other expenses.
Mixed Credit Quality
Provision for loan losses was $4.3 million, up 1.6% year over year. Also, non-covered non-performing assets as a percentage of total assets was 0.24%, compared with 0.21% in the prior-year quarter.
However, non-covered non-performing loans were $24.4 million, down 2.4% year over year.
Strong Balance sheet
As of Dec 31, 2016, Hilltop’s cash and due from banks was $669.4 million, up 26.6% sequentially. Further, total shareholders’ equity was $1.9 billion, compared with $1.8 billion recorded in the prior month.
Further, total assets were $12.7 billion as of Dec 31, 2016, up 2.5% sequentially. Also, total liabilities increased 2.7% from the prior-month to $10.9 billion.
Profitability and Capital Ratios Improved
Hilltop’s annualized return on average assets at the end of the reported quarter was 1.13%, up from 0.68% recorded in the prior-year quarter. Additionally, return on average equity was 7.56%, up from 4.70%.
The common equity tier 1 capital was 18.30%, up 43 bps year over year. Also, total capital ratio was 19.34%, up 45 bps year over year.
Management expects to generate $400 million of net revenue in the first quarter of 2017, relatively stable sequentially. Also, the company expects pre-tax margins to be in the range of 10-12%.
The company expects core margin to be in the range of 3.02%-3.08% in 2017, assuming no further rate hikes this year.
Further, the company expects purchase account accretion in 2017 to be approximately $10-12 million per quarter.
Management expects 2017 tax rate to be nearly 37%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
At this time, Hilltop Holdings' stock has a average Growth Score of 'C', though it is lagging a bit on the momentum front with a 'F'. The stock was allocated also 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 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is suitable for growth investors and value investors.
Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.