It has been about a month since the last earnings report for Hancock Holding Company . Shares have lost about 4.3% in the past month, underperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is HBHC 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 catalysts.
Hancock Holding Beats on Q4 Earnings, Provisions Up
Hancock Holding reported fourth-quarter 2017 adjusted earnings per share of 86 cents, which surpassed the Zacks Consensus Estimate of 83 cents. Also, the bottom line compares favorably with the prior-year quarter’s earnings of 64 cents.
Results benefited from an improvement in both net interest income and non-interest income. Further, growth in loans and deposits remained strong. However, an increase in expenses and higher provisions were the key dampeners.
After considering the impact of the $19.5 million or 22 cents per share tax reform related re-measurement charge of the net deferred tax asset (DTA), net income for the quarter came in at $55.4 million or 64 cents per share.
For 2017, net income came in at $215.6 million or $2.48 per share, up from $149.3 million or $1.87 per share registered in the prior year.
Revenues Improve, Expenses Escalate
Hancock’s net revenues for the quarter came in at $277.7 million, up 18.8% year over year. However, the figure lagged the Zacks Consensus Estimate of $282.7 million.
Net revenues for 2017 were $1.06 billion, up 16.5% year over year. However, the figure lagged the Zacks Consensus Estimate of $1.09 billion.
Quarterly net interest income grew 24% year over year to $208 million. Also, net interest margin on a tax-equivalent basis increased 22 basis points from the prior-year quarter to 3.48%.
Non-interest income totaled $69.7 million, reflecting an increase of 5.8% from the year-ago quarter. The growth was primarily driven by an improvement in service charges on deposit accounts, bank card and ATM fees, and Investment and annuity fees.
Total operating expenses increased 7.5% year over year to $168.1 million. The rise was primarily due to higher personnel expense, net occupancy expense, amortization of intangibles and other operating expense.
Credit Quality: Mixed Bag
Net charge-offs from the non-covered loan portfolio were 0.44% of average total loans, decreasing from 0.50% in the year-ago quarter.
However, total non-performing assets increased 6.4% year over year to $400.8 million. Also, provision for loan losses increased 3.7% year over year to roughly $15 million.
Strong Balance Sheet; Profitability & Capital Ratios Deteriorate
As of Dec 31, 2017, total loans were $19 billion, up 1.2% sequentially. Further, total deposits increased 3.3% from the prior quarter to $22.3 billion.
Return on average assets was 0.82% at the end of the quarter, down from 0.88% in the prior-year quarter. Moreover, return on average common equity was 7.67%, compared with 8.19% in the prior-year quarter end.
As of Dec 31, 2017, Tier 1 leverage ratio was 8.34%, down from 9.56% in the year-ago figure. Further, Tier 1 risk-based capital ratio came in at 10.08%, decreasing from 11.26% as of Dec 31, 2016.
Near-term Outlook
Management expects net loan growth of $200–$250 million in the first quarter of 2018. For 2018, it is expected in the range of 6-8%.
On the assumption of no further rate-hikes, the company expects NIM to increase 2-4 bps in first-quarter 2018.
Increase in revenues is expected to be driven by growth in interest income, partly offset by flat to lower non-interest income.
The company expects operating expenses to remain flat or increase slightly in first-quarter 2018, due to the seasonal increase in payroll related items. Also, it expects to incur additional charges, related to the acquisition of the trust and asset management business of Capital One.
As a result of the bonus that will be paid to employees, management expects to record one-time cost of $3-$4 million in first-quarter 2018.
Management expects the effective tax rate to be in the range of 16-18% in 2018. Also, the tax-cut is expected to add 7-9 cents per share to quarterly earnings in 2018.
The company expects loan loss provisions to be in the range of $12-$14 million in first-quarter 2018. Management projects charge-offs from energy-related credits to be close to $95 million.
Long-term Outlook (2018/2019 Corporate Strategic Objectives)
Hancock Holding plans to achieve these strategic objectives by fourth-quarter 2019 and the objectives assume no rate hikes in 2018 or 2019.
Management projects earnings of $1.00-$1.10 per share on a quarterly basis.
Efficiency ratio is expected to be less than equal to 56%.
Return on assets is projected to be 1.15-1.25%, while return on tangible common equity will be 15% and tangible common equity ratio is anticipated to be close to 8.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower.
VGM Scores
At this time, HBHC has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Following the exact same course, the stock was also allocated 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 B. 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 more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise HBHC has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Hancock Holding (HBHC) Down 4.3% Since the Last Earnings Report?
It has been about a month since the last earnings report for Hancock Holding Company . Shares have lost about 4.3% in the past month, underperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is HBHC 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 catalysts.
Hancock Holding Beats on Q4 Earnings, Provisions Up
Hancock Holding reported fourth-quarter 2017 adjusted earnings per share of 86 cents, which surpassed the Zacks Consensus Estimate of 83 cents. Also, the bottom line compares favorably with the prior-year quarter’s earnings of 64 cents.
Results benefited from an improvement in both net interest income and non-interest income. Further, growth in loans and deposits remained strong. However, an increase in expenses and higher provisions were the key dampeners.
After considering the impact of the $19.5 million or 22 cents per share tax reform related re-measurement charge of the net deferred tax asset (DTA), net income for the quarter came in at $55.4 million or 64 cents per share.
For 2017, net income came in at $215.6 million or $2.48 per share, up from $149.3 million or $1.87 per share registered in the prior year.
Revenues Improve, Expenses Escalate
Hancock’s net revenues for the quarter came in at $277.7 million, up 18.8% year over year. However, the figure lagged the Zacks Consensus Estimate of $282.7 million.
Net revenues for 2017 were $1.06 billion, up 16.5% year over year. However, the figure lagged the Zacks Consensus Estimate of $1.09 billion.
Quarterly net interest income grew 24% year over year to $208 million. Also, net interest margin on a tax-equivalent basis increased 22 basis points from the prior-year quarter to 3.48%.
Non-interest income totaled $69.7 million, reflecting an increase of 5.8% from the year-ago quarter. The growth was primarily driven by an improvement in service charges on deposit accounts, bank card and ATM fees, and Investment and annuity fees.
Total operating expenses increased 7.5% year over year to $168.1 million. The rise was primarily due to higher personnel expense, net occupancy expense, amortization of intangibles and other operating expense.
Credit Quality: Mixed Bag
Net charge-offs from the non-covered loan portfolio were 0.44% of average total loans, decreasing from 0.50% in the year-ago quarter.
However, total non-performing assets increased 6.4% year over year to $400.8 million. Also, provision for loan losses increased 3.7% year over year to roughly $15 million.
Strong Balance Sheet; Profitability & Capital Ratios Deteriorate
As of Dec 31, 2017, total loans were $19 billion, up 1.2% sequentially. Further, total deposits increased 3.3% from the prior quarter to $22.3 billion.
Return on average assets was 0.82% at the end of the quarter, down from 0.88% in the prior-year quarter. Moreover, return on average common equity was 7.67%, compared with 8.19% in the prior-year quarter end.
As of Dec 31, 2017, Tier 1 leverage ratio was 8.34%, down from 9.56% in the year-ago figure. Further, Tier 1 risk-based capital ratio came in at 10.08%, decreasing from 11.26% as of Dec 31, 2016.
Near-term Outlook
Management expects net loan growth of $200–$250 million in the first quarter of 2018. For 2018, it is expected in the range of 6-8%.
On the assumption of no further rate-hikes, the company expects NIM to increase 2-4 bps in first-quarter 2018.
Increase in revenues is expected to be driven by growth in interest income, partly offset by flat to lower non-interest income.
The company expects operating expenses to remain flat or increase slightly in first-quarter 2018, due to the seasonal increase in payroll related items. Also, it expects to incur additional charges, related to the acquisition of the trust and asset management business of Capital One.
As a result of the bonus that will be paid to employees, management expects to record one-time cost of $3-$4 million in first-quarter 2018.
Management expects the effective tax rate to be in the range of 16-18% in 2018. Also, the tax-cut is expected to add 7-9 cents per share to quarterly earnings in 2018.
The company expects loan loss provisions to be in the range of $12-$14 million in first-quarter 2018. Management projects charge-offs from energy-related credits to be close to $95 million.
Long-term Outlook (2018/2019 Corporate Strategic Objectives)
Hancock Holding plans to achieve these strategic objectives by fourth-quarter 2019 and the objectives assume no rate hikes in 2018 or 2019.
Management projects earnings of $1.00-$1.10 per share on a quarterly basis.
Efficiency ratio is expected to be less than equal to 56%.
Return on assets is projected to be 1.15-1.25%, while return on tangible common equity will be 15% and tangible common equity ratio is anticipated to be close to 8.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower.
Hancock Holding Company Price and Consensus
Hancock Holding Company Price and Consensus | Hancock Holding Company Quote
VGM Scores
At this time, HBHC has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Following the exact same course, the stock was also allocated 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 B. 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 more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise HBHC has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.