Hancock Whitney (HWC) Down 4.1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Hancock Whitney (HWC). Shares have lost about 4.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Hancock Whitney due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Hancock Whitney's Q4 Earnings Top Estimates, Costs Rise
Hancock Whitney’s fourth-quarter 2023 adjusted earnings per share of $1.26 beat the Zacks Consensus Estimate of $1.08. Adjusted earnings per share, however, compared unfavorably with $1.65 registered in the year-ago quarter.
The results were impacted by a decline in both net interest income (NII) and non-interest income. Further, a slight decrease in loan balances and an increase in expenses and provisions acted as spoilsports.
After considering a loss on the securities portfolio restructuring, sale of a parking facility and FDIC special assessment charge, net income was $50.6 million, decreasing 65% year over year. Our estimate for the metric was pinned at $82 million (this didn’t include non-recurring charges incurred during the quarter).
In 2023, adjusted earnings per share of $5.18 surpassed the Zacks Consensus Estimate of $5.03. Net income (GAAP) was $392.6 million, down 25.1% from the previous year's level.
Revenues Decline, Expenses Rise
Quarterly revenues amounted to $308.4 million, down 17% year over year. The top line missed the Zacks Consensus Estimate of $333.4 million.
In 2023, net revenues were $1.39 billion, which lagged the Zacks Consensus Estimate of $1.41 billion. The top line improved marginally from the 2022 level.
NII (on a tax-equivalent basis) declined 8.7% year over year to $272.3 million. The net interest margin was 3.27%, which contracted 41 basis points (bps). Our top-line estimates for NII and NIM were pegged at $248.9 million and 3.23%, respectively.
Non-interest income totaled $39 million, down 49.5% from the prior-year quarter's level. This drastic decline was mainly due to the restructuring of the securities portfolio. Excluding this, adjusted non-interest income totaled $88.2 million. We had projected the metric to be $85.4 million.
Total non-interest expenses increased 20.5% year over year to $229.2 million. This includes an item of supplemental disclosure related to the FDIC special assessment. Excluding this, adjusted expenses amounted to $203 million. We projected expenses of $199.1 million, which did not include FDIC special assessment costs.
The efficiency ratio increased to 55.58% from 49.81% in the year-ago quarter. A rise in the efficiency ratio reflects lower profitability.
As of Dec 31, 2023, total loans amounted to $23.9 billion, down marginally from the prior-quarter level. Total deposits decreased 2.1% on a sequential basis to $29.7 billion. Our estimates for total loans and deposits were pinned at $23.7 billion and $29.6 billion, respectively.
Credit Quality Worsens
The provision for credit losses was $17 million, up significantly from $2.5 million in the prior-year quarter. Our estimate for provisions totaled $28.8 million.
Net charge-offs (annualized) were 0.27% of average total loans, up 25 bps from the prior-year quarter's level.
Capital Ratios Improve, Profitability Ratios Worsen
As of Dec 31, 2023, the Tier 1 leverage ratio was 10.10%, up from 9.53% at the end of the year-earlier quarter. The common equity Tier 1 ratio was 12.39%, up from 11.41% as of Dec 31, 2022.
At the end of the fourth quarter, the return on average assets was 0.56%, down from the year-ago period’s 1.65%. The return on average common equity was 5.64%, down from 17.67% in the prior-year quarter.
Share Repurchase Update
In the reported quarter, HWC did not repurchase any share.
2024 Outlook
Management expects period-end loan growth to be in low single-digits, mostly in the second half of 2024. Further, growth in deposit balances is anticipated to be in low single-digits.
Pre-provision net revenues are expected to decrease 1-2% year over year.
NIM is expected to modestly expand on the assumptions of three rate cuts of 25 bps, each beginning in June 2024.
Adjusted non-interest income is expected to grow in the range of 3-4%.
Adjusted non-interest expenses are expected to rise in the band of 3-4%.
Management expects to maintain an efficiency ratio in the range of 56-58%.
Hancock Whitney expects low to modest charge-offs and provisions.
The company expects an effective tax rate of 21%.
Three-Year Corporate Strategic Objectives (to be Achieved by fourth quarter 2026)
Return on assets is expected to be in the range of 1.30-1.50%.
Tangible common equity (TCE) of more than 8% is anticipated.
Return on TCE is expected to be more than 18%.
An efficiency ratio of less than or equal to 55% is targeted.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, Hancock Whitney has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise Hancock Whitney has a Zacks Rank #2 (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
