Hancock Whitney (HWC) Up 1.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Hancock Whitney (HWC). Shares have added about 1.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hancock Whitney due for a pullback? 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 drivers.
Hancock Whitney Q4 Earnings Beat Estimates, Revenues Lag
Hancock Whitney Corporation’s fourth-quarter 2021 adjusted earnings of $1.51 per share outpaced the Zacks Consensus Estimate of $1.35. The bottom line improved 29% from the prior-year quarter.
Results benefited from higher non-interest income, fall in non-interest expenses and provision benefit. However, a decline in net interest income, which reflected lower interest rates, was the undermining factor.
Results excluded the impact of non-operating items. Including these, net income came in at $137.7 million, up 32.9% from the prior-year quarter.
In 2021, net income was $463.2 million against a loss of $45.2 million in 2020.
Revenues and Expenses Fall
Total quarterly revenues were $318.9 million, down marginally year over year. The top line also missed the Zacks Consensus Estimate of $321.7 million.
In 2021, net revenues increased 2.4% to $1.29 billion. However, the top line lagged the consensus estimate of $1.30 billion.
Net interest income on a tax-equivalent basis declined 3.9% to $231.9 million. NIM (on a tax-equivalent basis) was 2.80%, contracting 42 basis points (bps).
Non-interest income was $89.6 million, growing 8.8% year over year. The rise was driven by a jump in almost all fee income components, except for secondary mortgage market operations fees.
Total non-interest expenses declined 5.5% to $182.5 million. The decline was mainly attributable to lower other expenses, net occupancy and equipment expenses, as well as personnel expenses.
Efficiency ratio decreased to 56.57% from 58.23% in the year-ago quarter. A decline in efficiency ratio indicates an improvement in profitability.
As of Dec 31, 2021, total loans were $21.1 billion, up 1.2% from the prior-quarter end. Total deposits increased 4.3% to $30.5 billion.
Credit Quality Improves
Provision for loan losses was a benefit of $28.4 million against a provision of $24.2 million in the prior-year quarter. Net charge-offs (annualized) were 0.01% of average total loans, down 43 bps from the year-ago quarter.
Total non-performing assets plunged 57.1% from the prior-year quarter to $66.8 million.
Capital & Profitability Ratios Improve
As of Dec 31, 2021, Tier 1 leverage ratio was 8.25%, up from 7.88% at the end of the year-earlier quarter. Tier 1 risk-based capital ratio was 11.16%, up from 10.61% as of Dec 31, 2020.
At the end of the fourth quarter, return on average assets was 1.53%, up from the year-ago period’s 1.25%. Return on average common equity was 15%, up from 12.1% in the prior-year quarter.
Share Repurchase Update
During the quarter under review, Hancock Whitney repurchased 393,527 shares at an average price of $48.98 per share.
Full-Year 2022 Outlook
Management expects total core loans to be up 6-8% year over year, with quarterly performance affected by seasonality.
Total deposits are expected to be flat or slightly down from 2021-level.
NIM is expected to remain flat to slightly down through mid-year 2022 from the fourth quarter 2021 level, and thereafter begin to expand.
Non-interest income is expect to remain flattish as improvement in most fee categories will be offset by lower secondary mortgage fees.
Non-interest expenses are anticipated to be down roughly 2%.
Core pre-provision net revenue is expected to grow between 10-12%.
Majority of remaining Paycheck Protection Program (PPP) loans are expected be forgiven by second quarter of 2022, with minimal impact from the same expected in the second half of the year.
Reserve for credit losses will be driven by future assumptions in economic forecasts. The company expects modest reserve releases to continue over next several quarters.
Planned investment of bond in the fourth quarter 2021 expected to continue this year to grow the portfolio approximately $300 million per quarter through the fourth quarter of 2022.
Effective tax rate is anticipated to be 19-20%.
Path to 55% Efficiency Ratio
Hancock Whitney targets to achieve an efficiency ratio of 55% by the fourth quarter 2022-end. For this, management has come up with revenue and efficiency strategies.
The company projects continued momentum in core loan growth at a mid-single digit rate and to maintain quarterly expenses in 2022. Further, the company tends to have additional efficiency initiatives like strategic procurements that will support cost saving plan. Also, to improve revenues, the company has been hiring bankers in growth and new markets across its footprint, with more such hiring planned for this year. It has further deployment its excess liquidity into loans and reinvestments in bond.
Three-Year Corporate Strategic Objectives (to be Achieved by the Fourth-Quarter of 2024)
Return on asset of 1.35-1.45% is expected.
Tangible common equity (TCE) of more than 8% is anticipated.
Return on TCE is expected to be more than 15%.
Efficiency ratio of less than or equal to 55% is targeted.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 12.65% due to these changes.
VGM Scores
Currently, Hancock Whitney has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Hancock Whitney has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Hancock Whitney Corporation (HWC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
