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Hancock Whitney (HWC) Down 11.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Hancock Whitney (HWC - Free Report) . Shares have lost about 11.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Hancock Whitney 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.

Hancock Whitney Q2 Earnings Match, Revenues Rise Y/Y

Hancock Whitney second-quarter 2019 operating earnings per share of $1.01 came in line with the Zacks Consensus Estimate. The bottom line was 5.2% higher than the year-ago figure.

Improvement in net revenues, modest loan growth and decline in provision for loan losses supported the results. However, higher expenses and a slight fall in deposit balance were the undermining factors.

Net income was $88.3 million, up 24% from the prior-year quarter. Net income in the year-ago quarter included certain non-operating items.

Revenues & Expenses Rise

Net revenues were $299.1 million, up 6.7% year over year. The figure beat the Zacks Consensus Estimate of $294.0 million.

Net interest income on tax equivalent basis grew 3.7% year over year to $223.6 million. Net interest margin, on a tax-equivalent basis, came in at 3.45%, up 5 basis points (bps).

Non-interest income totaled $79.3 million, indicating 15.1% improvement from the year-ago quarter. Increase in all fee income components except service charges on deposits led to this upside.

Total operating expenses increased 8.9% year over year to $183.6 million. This upswing resulted from rise in all cost components except amortization of intangibles expenses.

As of Jun 30, 2019, total loans were $20.2 billion, slightly up from the prior-quarter end. Total deposits decreased nearly 1% from the previous quarter to $23.2 billion.

Credit Quality: Mixed Bag

Net charge-offs from the non-covered loan portfolio was 0.14% of average total loans, up 3 bps from the year-ago quarter. However, provision for loan losses declined 9% year over year to $8.1 million. Further, total non-performing assets decreased 18.7% to $338.6 million.

Profitability & Capital Ratios Improve

Return on average assets was 1.24% at the end of the reported quarter, up from 1.04% recorded in the prior-year quarter. In addition, return on average common equity was 10.96% compared with 9.81% at the end of June 2018.

As of Jun 30, 2019, Tier 1 leverage ratio was 9.10%, up from 8.66% recorded in the year-earlier quarter. Tier 1 risk-based capital ratio was 10.99%, up from 10.48% as of Jun 30, 2018.

2019 Outlook (excluded the impact of planned MidSouth Bancorp acquisition)

NIM is projected to be flat, based on the assumption of no change in interest rates. Average loan growth is expected to be in the mid-single digits range.

Operating non-interest income is expected to increase 6-7%.

Operating expenses are expected to flare up 5-6%, up from the prior outlook of the 4-5% range. The rise in expense guidance is mainly due to increase in technology spending by the company.

Both operating non-interest income and operating expense include the Capital One trust and asset management acquisition.

Loan loss provision is estimated between $16 million and $18 million in the second half of 2019.

Effective tax rate is expected to be nearly 17-19%.

Long-Term Outlook – Corporate Strategic Objectives (on a Quarterly Basis)

These objectives are to be achieved by fourth-quarter 2020. Earnings per share (excluding non-recurring items) are expected to be in the range of $1.20 to $1.25. Efficiency ratio is projected to be lower than 56%.

ROA (operating) will likely be between 1.40% and 1.45%. Tangible common equity (TCE) ratio is anticipated to be more than 8% and return on tangible common equity (ROTCE) ratio (operating) is expected to be more than 15%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Hancock Whitney has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, 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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