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5 Reasons to Add Hilltop Holdings Stock to Your Portfolio Now
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It seems to be a wise idea to add the Hilltop Holdings Inc. (HTH - Free Report) stock to your portfolio now. The company’s robust balance sheet and business-restructuring activities are expected to keep aiding the top line. A solid liquidity position is another positive.
Analysts seem optimistic regarding HTH’s earnings growth potential. The Zacks Consensus Estimate for the company’s 2024 earnings has been revised 2.3% upward over the past 60 days. Thus, HTH currently sports a Zacks Rank #1 (Strong Buy).
Looking at its price performance, HTH shares have gained 2.7% over the past six months compared with the industry's growth of 13.1%.
Image Source: Zacks Investment Research
Some of the factors that make Hilltop Holdings a solid pick right now are mentioned below.
Revenue Growth: HTH’s top-line growth is impressive. Its net interest income (NII) witnessed a compound annual growth rate (CAGR) of 1.5% over the five years ended 2023. The rise was partly driven by acquisitions completed during that period, decent loan demand and higher interest rates.
Supported by higher rates, the company’s net interest margin (NIM) increased to 3.09% in 2023 from 2.88% in 2022 and 2.57% in 2021. While NII and NIM declined in the first half of 2024 because of high funding and deposit costs, both metrics are expected to stabilize gradually as the Federal Reserve has started cutting interest rates beginning this September.
While we project NII to fall 7.5% in 2024, the metric is estimated to rebound and grow 7.8% and 7% in 2025 and 2026, respectively. Also, we project NIM (on an FTE basis) to be 2.87%, 2.95% and 3.08% in 2024, 2025 and 2026, respectively.
Earnings Strength: In the last three to five years, the company’s earnings declined 16.2%. While we project earnings growth to be negative in 2024, the trend will likely reverse post that. In 2025 and 2026, we estimate earnings to grow 10.4% and 26.8%, respectively.
Also, HTH has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 30.4%.
Steady Capital Distributions: Supported by a strong balance sheet, Hilltop Holdings announced a dividend for the first time in 2016. Since then, the company has been increasing dividends regularly, with the last hike announced in January 2024.
Also, the company’s board of directors approved a stock repurchase program through January 2025, under which the company may repurchase up to $75 million worth of its outstanding common stock. As of June 30, 2024, $55 million worth of shares remained authorized for repurchase. Driven by its earnings strength and strong capital and liquidity positions, the company will be able to sustain its current capital distribution activities, thus enhancing shareholder value.
Solid Business Restructuring Efforts: Hilltop Holdings has grown significantly through business restructuring efforts. In 2020, the company divested its insurance division — National Lloyds Corporation. Further, since the buyout of PlainsCapital in 2012, the company’s business has expanded tremendously through acquisitions with the consolidation of its position in Texas, Oklahoma, Georgia, Tennessee and Arizona.
These deals are not only accretive to earnings but have also helped the company diversify its operations from core Property & Casualty insurance to a profitable banking operation.
Favorable Valuation: Hilltop Holdings’ stock looks undervalued right now with respect to its price-to-book (P/B) and price-to-sales (P/S) ratios. It has a P/B ratio of 0.95, lower than the industry average of 1.03. Moreover, the company’s P/S ratio of 1.28 is below the industry average of 1.97.
Earnings estimates for GABC for the current year have been revised 3.4% upward over the past 60 days. The company’s shares have rallied 13.6% in the past six months.
Estimates for HTLF’s current-year earnings have been revised marginally upward in the past 60 days. The company’s shares have surged 62% in the past six months.
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5 Reasons to Add Hilltop Holdings Stock to Your Portfolio Now
It seems to be a wise idea to add the Hilltop Holdings Inc. (HTH - Free Report) stock to your portfolio now. The company’s robust balance sheet and business-restructuring activities are expected to keep aiding the top line. A solid liquidity position is another positive.
Analysts seem optimistic regarding HTH’s earnings growth potential. The Zacks Consensus Estimate for the company’s 2024 earnings has been revised 2.3% upward over the past 60 days. Thus, HTH currently sports a Zacks Rank #1 (Strong Buy).
Looking at its price performance, HTH shares have gained 2.7% over the past six months compared with the industry's growth of 13.1%.
Image Source: Zacks Investment Research
Some of the factors that make Hilltop Holdings a solid pick right now are mentioned below.
Revenue Growth: HTH’s top-line growth is impressive. Its net interest income (NII) witnessed a compound annual growth rate (CAGR) of 1.5% over the five years ended 2023. The rise was partly driven by acquisitions completed during that period, decent loan demand and higher interest rates.
Supported by higher rates, the company’s net interest margin (NIM) increased to 3.09% in 2023 from 2.88% in 2022 and 2.57% in 2021. While NII and NIM declined in the first half of 2024 because of high funding and deposit costs, both metrics are expected to stabilize gradually as the Federal Reserve has started cutting interest rates beginning this September.
While we project NII to fall 7.5% in 2024, the metric is estimated to rebound and grow 7.8% and 7% in 2025 and 2026, respectively. Also, we project NIM (on an FTE basis) to be 2.87%, 2.95% and 3.08% in 2024, 2025 and 2026, respectively.
Earnings Strength: In the last three to five years, the company’s earnings declined 16.2%. While we project earnings growth to be negative in 2024, the trend will likely reverse post that. In 2025 and 2026, we estimate earnings to grow 10.4% and 26.8%, respectively.
Also, HTH has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 30.4%.
Steady Capital Distributions: Supported by a strong balance sheet, Hilltop Holdings announced a dividend for the first time in 2016. Since then, the company has been increasing dividends regularly, with the last hike announced in January 2024.
Also, the company’s board of directors approved a stock repurchase program through January 2025, under which the company may repurchase up to $75 million worth of its outstanding common stock. As of June 30, 2024, $55 million worth of shares remained authorized for repurchase. Driven by its earnings strength and strong capital and liquidity positions, the company will be able to sustain its current capital distribution activities, thus enhancing shareholder value.
Solid Business Restructuring Efforts: Hilltop Holdings has grown significantly through business restructuring efforts. In 2020, the company divested its insurance division — National Lloyds Corporation. Further, since the buyout of PlainsCapital in 2012, the company’s business has expanded tremendously through acquisitions with the consolidation of its position in Texas, Oklahoma, Georgia, Tennessee and Arizona.
These deals are not only accretive to earnings but have also helped the company diversify its operations from core Property & Casualty insurance to a profitable banking operation.
Favorable Valuation: Hilltop Holdings’ stock looks undervalued right now with respect to its price-to-book (P/B) and price-to-sales (P/S) ratios. It has a P/B ratio of 0.95, lower than the industry average of 1.03. Moreover, the company’s P/S ratio of 1.28 is below the industry average of 1.97.
Other Bank Stocks Worth a Look
A couple of other top-ranked stocks from the banking space are German American Bancorp, Inc. (GABC - Free Report) and Heartland Financial USA, Inc. (HTLF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates for GABC for the current year have been revised 3.4% upward over the past 60 days. The company’s shares have rallied 13.6% in the past six months.
Estimates for HTLF’s current-year earnings have been revised marginally upward in the past 60 days. The company’s shares have surged 62% in the past six months.