Here's Why Hancock Whitney (HWC) is Worth Buying Right Now
Hancock Whitney HWC is well poised to benefit from its robust loans and deposit balances, business expansion initiatives, and high interest rates. However, rising funding costs are likely to weigh on the financials to some extent. The stock seems to be a good investment pick right now.
The Zacks Consensus Estimate for Hancock Whitney’s 2024 and 2025 earnings has been revised 1.5% and 3.7% upward, respectively, over the past 30 days. The positive estimate revision indicates that analysts are optimistic regarding the company’s prospects and earnings potential. HWC currently sports a Zacks Rank #1 (Strong Buy).
Over the past three months, HWC’s shares have gained 15.2% compared with the industry’s rally of 12.1%.
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Now, let’s dive deeper into the factors that make HWC stock a strong investment pick right now.
Balance Sheet Strength: Hancock Whitney’s bond restructuring and balance sheet deleveraging plan has strengthened its balance sheet. As of Dec 31, 2023, the Tier 1 leverage ratio and CET1 ratio increased to 10.10% and 12.39% from 9.53% and 11.41% as of Dec 31, 2022, respectively.
This is further reinforced by the investment grade ratings of BBB/Baa3 and a stable outlook from Standard and Poor and Moody’s Investors Service, respectively. Given the decent liquidity strength, HWC is expected to survive a challenging macroeconomic environment and fulfill its near-term debt obligations.
Strong Capital Distribution: In January 2023, the company announced an 11% hike in the quarterly dividend to 30 cents per share. A share repurchase plan is in place, which was announced in January 2023, authorizing the company to repurchase 4.3 million shares through Dec 31, 2024. As of Dec 31, 2023, the whole authorization remained available. On the back of decent liquidity and a strong balance sheet position, HWC is expected to sustain efficient capital distribution.
Earnings Potential: Hancock Whitney’s earnings growth rate over three to five years has been 14.5%, higher than the industry average of 8.6%. Further, the company’s earnings have consistently beaten the Zacks Consensus Estimate, with the average four-quarter surprise being 5.22%.
Though earnings are expected to decline 7.7% in 2024, the trend is anticipated to reverse in 2025, with year-over-year earnings growth of 5.8%.
Revenue Potential: Hancock Whitney’s near-term revenue growth prospects remain decent. Revenues witnessed a CAGR of 4% over the last five years (ended 2023). High interest rates, decent loan demand and the company’s strategic growth expansion efforts are expected to support top-line growth.
Furthermore, Hancock Whitney’s s balance sheet deleveraging strategy (executed in the fourth quarter of 2023) is expected to drive net interest margin (NIM) in the upcoming quarters. Management projects NIM to witness modest improvement in 2024 on the back of three rate cuts, stabilizing deposit costs and a rise in loan yields. We project NIM growth to be 3.26% in 2024 and 3.28% in 2025.
Per our model, revenues are estimated to witness a CAGR of 2.7% over the next three years ending 2026, whereas total loans are expected to rise 1.6% over the same period.
Superior Returns: HWC’s net profit margin and return on equity are 20.57% and 12.54%, respectively, against the industry’s 17.45% and 9.86%, respectively. This indicates efficient capital allocation and utilization of shareholders' funds.
Stock Seems Undervalued: The Hancock Whitney stock seems undervalued compared with the industry. Its current Price/Earnings (F1) and Price/Book ratios are 9.52 and 0.98, below the industry averages of 11 and 1.01, respectively.
The stock has a Value Score of B. Our research suggests that stocks with a Style Score of A or B, when combined with Zacks Rank #1 (Strong Buy) or 2, offer the highest upside potential.
Other Bank Stocks Worth Considering
A couple of other top-ranked banking stocks are Bank7 Corp. BSVN and First Bancorp FBNC, sporting a Zacks Rank #1 each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for Bank7's 2024 earnings have moved 5.8% upward over the past 30 days. BSVN has rallied 24.3% over the past three months.
Estimates for First Bancorp’s 2024 earnings have been revised 2.3% north over the past 30 days. FBNC has gained 19.4% over the past three months.
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