A month has gone by since the last earnings report for Hilltop Holdings Inc. (HTH - Free Report) . Shares have lost about 3.3% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is HTH due for a breakout? 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 drivers.
Hilltop Holdings’ Q1 Earnings Miss, Revenues Down Y/Y
Hilltop Holdings’ first-quarter 2018 earnings per share of 25 cents lagged the Zacks Consensus Estimate of 32 cents. Moreover, the figure compared unfavorably with the prior-year quarter’s earnings of 27 cents per share.
Results were primarily hurt by a decrease in non-interest income. Also, while the company witnessed a recovery from loan losses during the reported quarter, overall credit quality metrics worsened. Further, profitability and capital ratios declined. However, lower expenses and higher net interest income acted as tailwinds.
Net income applicable to common stockholders for the quarter was $24.4 million, down from $26.4 million registered in the prior-year quarter.
Revenues & Costs Decrease
Net revenues for the quarter were $338.6 million, decreasing 6.9% year over year. Also, the figure lagged the Zacks Consensus Estimate of $364.5 million.
Net interest income for the quarter was $103.4 million, increasing 12.3% year over year. Net interest margin (taxable equivalent basis) was 3.53%, up 4 basis points (bps) from the prior-year quarter.
Non-interest income decreased 13.4% from the year-ago quarter to $235.1 million. The decline was due to a fall in all components except mortgage loan origination fees, and securities commissions and fees.
Non-interest expenses decreased 3.8% year over year to $308.2 million. This was attributable to a decline in all cost components except net occupancy and equipment costs.
Credit Quality: Mixed Bag
During the reported quarter, the company witnessed a recovery from loan losses of $1.8 million as against a provision of $1.7 million in the prior-year quarter.
However, non-covered non-performing assets as a percentage of total assets were 0.32% at the end of the quarter, up 4 bps from the prior-year quarter. Also, non-covered non-performing loans were $39.4 million as of Mar 31, 2018, up from $28.8 million as of Mar 31, 2017.
Strong Balance Sheet
As of Mar 31, 2018, Hilltop Holdings’ cash and due from banks was $470.1 million compared with $487 million in the prior-quarter end. Total shareholders’ equity was $1.9 billion, marginally up sequentially.
Net non-covered loans were $6.2 billion as of Mar 31, 2018, down marginally from the prior-quarter end. Total deposits were nearly $8 billion, almost in line with the prior-quarter figure.
Profitability & Capital Ratios Deteriorate
Return on average assets at the end of the reported quarter was 0.77%, down from 0.88% in the prior-year quarter. Additionally, return on average equity was 5.19%, decreasing from 5.73% in the year-ago quarter.
Common equity tier 1 capital ratio was 18.60% as of Mar 31, 2018, down from 19.03% as of Mar 31, 2017. Also, total capital ratio was 19.63%, declining from 20.12% in the prior-year quarter.
The company expects net revenues in the Broker-Dealer segment to be approximately $360-$375 million in 2018.
The company expects core margin to be in the range of 3.17-3.23% in 2018, assuming no further rate hikes this year.
Management expects total loan growth of 6 in 2018.
The company expects GAAP effective tax rate to be nearly 23-25%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
At this time, HTH has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 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.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise HTH has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.