Hilltop Holdings Inc. (NYSE:HTH) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The stock price has risen 5.3% to US$19.47 over the past week, suggesting investors are becoming more optimistic. It will be interesting to see if this latest upgrade is enough to kickstart further buying interest in the stock.
Following the latest upgrade, the five analysts covering Hilltop Holdings provided consensus estimates of US$1.7b revenue in 2020, which would reflect a perceptible 3.0% decline on its sales over the past 12 months. Statutory earnings per share are supposed to sink 14% to US$2.62 in the same period. Before this latest update, the analysts had been forecasting revenues of US$1.5b and earnings per share (EPS) of US$1.99 in 2020. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
Despite these upgrades, the analysts have not made any major changes to their price target of US$23.50, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Hilltop Holdings, with the most bullish analyst valuing it at US$30.00 and the most bearish at US$21.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 3.0% revenue decline a notable change from historical growth of 1.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 1.9% annually for the foreseeable future. It's pretty clear that Hilltop Holdings' revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing to take away from this upgrade is that analysts upgraded their earnings per share estimates for this year, expecting improving business conditions. Pleasantly, analysts also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow slower than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Hilltop Holdings could be a good candidate for more research.
Analysts are clearly in love with Hilltop Holdings at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as recent substantial insider selling. You can learn more, and discover the 3 other warning signs we've identified, for free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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