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6 Reasons Why You Should Bet on Hancock Whitney Stock Right Now
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Hancock Whitney (HWC - Free Report) is well poised to benefit from its solid balance sheet, prospects of interest rate cuts and strategic efforts to bolster net interest margin (NIM) despite concerns related to high funding costs.
Bullish Analyst Sentiments for HWC
The Zacks Consensus Estimate for Hancock Whitney’s 2024 and 2025 has been revised marginally upward over the past month. The positive estimate revision indicates that analysts are optimistic regarding the company’s prospects and earnings potential.
Estimate Revision Trend
Image Source: Zacks Investment Research
Zacks Rank & Price Performance
HWC currently carries a Zacks Rank #2 (Buy).
Over the past month, HWC’s shares have gained 11.5% compared with the industry’s rally of 10.5%.
One-Month Price Performance Chart
Image Source: Zacks Investment Research
Growth Drivers for Hancock Whitney Stock
Fed’s Likely Rate Cut Decision to Aid Financials: The Federal Reserve chairman Jerome Powell, in his speech on Aug. 23, stated, “The time has come for policy to adjust.” This has set the stage for the first interest rate cut since March 2020. The rate cut will strengthen HWC’s NII and NIM via lower funding costs.
Currently, interest rates are at a 23-year high of 5.25-5.5%. These rates have a varied effect on banks. While higher interest rates lead to substantial growth in NII, rising funding costs exert pressure on both NII and NIM.
Hancock Whitney’s NII witnessed a 7% compound annual growth rate (CAGR) over the four years ended 2023, driven by higher rates and loan growth. Similarly, NIM expanded to 3.34% in 2023 from 3.26% in 2022 and 2.95% in 2021.
Nonetheless, both metrics declined in the first six months of 2024 due to higher funding costs.
The interest rate cuts will lead to the stabilization and eventual reduction in the deposit costs for HWC. As rates come down, the demand for loans will also improve. This, in turn, will lead to an improvement in NII and NIM.
Also, the company’s strategic shift toward full relationship loans and its growth expansion efforts are expected to support NII.
Furthermore, Hancock Whitney’s s balance sheet deleveraging strategy (executed in the fourth quarter of 2023) is expected to drive NIM in the upcoming quarters.
Management anticipates roughly $411 million in principal cash flow from the bond portfolio during the second half of 2024. The company expects these cash flows to be reinvested at higher yields, thereby aiding NIM.
We project NII to decline marginally in 2024, with subsequent growth of 2.4% and 2.9% in 2025 and 2026, respectively. Further, we estimate NIM to be 3.38%, 3.43% and 3.53% in 2024, 2025 and 2026, respectively.
Balance Sheet Strength: Hancock Whitney’s bond restructuring and balance sheet deleveraging plan has strengthened its balance sheet. As of June 30, 2024, the company had a total debt of $1.6 billion (majorly short-term borrowings). Its cash and cash equivalents (comprising cash and due from banks and interest-bearing bank deposits) was $1.1 billion.
This is further reinforced by the investment grade ratings of BBB/Baa3 and a stable outlook from Standard and Poor and Moody’s Investors Service, respectively. Given the decent liquidity and earnings strength, HWC is expected to confront a challenging macroeconomic environment and address its near-term debt obligations.
Strong Capital Position: As of June 30, 2024, the company’s common equity tier 1 ratio and total capital ratio were 13.25% and 15%, well-capitalized above regulatory requirements. This indicates a strong capital position, which enables the company to maintain capital distribution plans efficiently.
In April 2024, the company announced a 33.3% hike in the quarterly dividend to 40 cents per share. HWC has increased its dividend twice in the last five years with an annualized dividend growth rate of 4.4%.
Dividend Yield
Image Source: Zacks Investment Research
Also, the company has a share repurchase plan in place, which was announced in January 2023, authorizing the company to repurchase 4.3 million shares through Dec 31, 2024. As of June 30, 2023, roughly $4 million shares remained available under the authorization.
Management remains optimistic about pursuing share buybacks in the latter half of the year at a similar pace to the second quarter of 2024.
On the back of decent liquidity and a strong balance sheet position, HWC is expected to sustain efficient capital distribution.
Earnings Potential: Hancock Whitney’s earnings growth rate over the last three to five years has been 15.8%, significantly higher than the industry average of 6.9%. Further, the company’s earnings consistently beat the Zacks Consensus Estimate in the trailing four quarters, with the average surprise being 9.48%.
We project earnings to grow 12.1%, 1.5%, and 4.6% in 2024, 2025 and 2026 respectively.
Superior Returns: HWC’s net profit margin and return on equity are 18.63% and 11.51%, respectively, against the industry’s 15.04% and 9.07%. This indicates efficient capital allocation and utilization of shareholders' funds.
Stock Seems Undervalued: Hancock Whitney's stock seems undervalued compared with the industry. Its current price/earnings (F1) and price/cash flow ratios are 10.39 and 9.07, below the industry averages of 12.83 and 10.01, respectively.
The stock has a Value Score of B. Our research suggests that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the highest upside potential.
Image: Shutterstock
6 Reasons Why You Should Bet on Hancock Whitney Stock Right Now
Hancock Whitney (HWC - Free Report) is well poised to benefit from its solid balance sheet, prospects of interest rate cuts and strategic efforts to bolster net interest margin (NIM) despite concerns related to high funding costs.
Bullish Analyst Sentiments for HWC
The Zacks Consensus Estimate for Hancock Whitney’s 2024 and 2025 has been revised marginally upward over the past month. The positive estimate revision indicates that analysts are optimistic regarding the company’s prospects and earnings potential.
Estimate Revision Trend
Image Source: Zacks Investment Research
Zacks Rank & Price Performance
HWC currently carries a Zacks Rank #2 (Buy).
Over the past month, HWC’s shares have gained 11.5% compared with the industry’s rally of 10.5%.
One-Month Price Performance Chart
Image Source: Zacks Investment Research
Growth Drivers for Hancock Whitney Stock
Fed’s Likely Rate Cut Decision to Aid Financials: The Federal Reserve chairman Jerome Powell, in his speech on Aug. 23, stated, “The time has come for policy to adjust.” This has set the stage for the first interest rate cut since March 2020. The rate cut will strengthen HWC’s NII and NIM via lower funding costs.
Currently, interest rates are at a 23-year high of 5.25-5.5%. These rates have a varied effect on banks. While higher interest rates lead to substantial growth in NII, rising funding costs exert pressure on both NII and NIM.
Hancock Whitney’s NII witnessed a 7% compound annual growth rate (CAGR) over the four years ended 2023, driven by higher rates and loan growth. Similarly, NIM expanded to 3.34% in 2023 from 3.26% in 2022 and 2.95% in 2021.
Nonetheless, both metrics declined in the first six months of 2024 due to higher funding costs.
The interest rate cuts will lead to the stabilization and eventual reduction in the deposit costs for HWC. As rates come down, the demand for loans will also improve. This, in turn, will lead to an improvement in NII and NIM.
Also, the company’s strategic shift toward full relationship loans and its growth expansion efforts are expected to support NII.
Furthermore, Hancock Whitney’s s balance sheet deleveraging strategy (executed in the fourth quarter of 2023) is expected to drive NIM in the upcoming quarters.
Management anticipates roughly $411 million in principal cash flow from the bond portfolio during the second half of 2024. The company expects these cash flows to be reinvested at higher yields, thereby aiding NIM.
We project NII to decline marginally in 2024, with subsequent growth of 2.4% and 2.9% in 2025 and 2026, respectively. Further, we estimate NIM to be 3.38%, 3.43% and 3.53% in 2024, 2025 and 2026, respectively.
Balance Sheet Strength: Hancock Whitney’s bond restructuring and balance sheet deleveraging plan has strengthened its balance sheet. As of June 30, 2024, the company had a total debt of $1.6 billion (majorly short-term borrowings). Its cash and cash equivalents (comprising cash and due from banks and interest-bearing bank deposits) was $1.1 billion.
This is further reinforced by the investment grade ratings of BBB/Baa3 and a stable outlook from Standard and Poor and Moody’s Investors Service, respectively. Given the decent liquidity and earnings strength, HWC is expected to confront a challenging macroeconomic environment and address its near-term debt obligations.
Strong Capital Position: As of June 30, 2024, the company’s common equity tier 1 ratio and total capital ratio were 13.25% and 15%, well-capitalized above regulatory requirements. This indicates a strong capital position, which enables the company to maintain capital distribution plans efficiently.
In April 2024, the company announced a 33.3% hike in the quarterly dividend to 40 cents per share. HWC has increased its dividend twice in the last five years with an annualized dividend growth rate of 4.4%.
Dividend Yield
Image Source: Zacks Investment Research
Also, the company has a share repurchase plan in place, which was announced in January 2023, authorizing the company to repurchase 4.3 million shares through Dec 31, 2024. As of June 30, 2023, roughly $4 million shares remained available under the authorization.
Management remains optimistic about pursuing share buybacks in the latter half of the year at a similar pace to the second quarter of 2024.
On the back of decent liquidity and a strong balance sheet position, HWC is expected to sustain efficient capital distribution.
Earnings Potential: Hancock Whitney’s earnings growth rate over the last three to five years has been 15.8%, significantly higher than the industry average of 6.9%. Further, the company’s earnings consistently beat the Zacks Consensus Estimate in the trailing four quarters, with the average surprise being 9.48%.
We project earnings to grow 12.1%, 1.5%, and 4.6% in 2024, 2025 and 2026 respectively.
Superior Returns: HWC’s net profit margin and return on equity are 18.63% and 11.51%, respectively, against the industry’s 15.04% and 9.07%. This indicates efficient capital allocation and utilization of shareholders' funds.
Stock Seems Undervalued: Hancock Whitney's stock seems undervalued compared with the industry. Its current price/earnings (F1) and price/cash flow ratios are 10.39 and 9.07, below the industry averages of 12.83 and 10.01, respectively.
The stock has a Value Score of B. Our research suggests that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the highest upside potential.
Other Bank Stocks Worth Considering
A couple of other top-ranked banking stocks are First Community Corporation (FCCO - Free Report) and First Reliance Bancshares, Inc. (FSRL - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for FCCO's 2024 earnings have moved 8.4% upward over the past 60 days. First Community’s shares have rallied 35.7% over the past six months.
Estimates for First Reliance’s 2024 earnings have been revised 11.3% north over the past week. FSRL has gained 11.4% over the past six months.