Since Federal Reserve Chairman Jerome Powell spoke at the Jackson Hole symposium last month, markets have been slipping – and largely in response to his comments. The central bank head made it clear in his comments that he’ll continue pushing interest rates up in an effort to combat inflation, which is currently running at 8.5% annually. It appears that investors are in the process of pricing in that stance, and expectations are that the Fed will institute another 0.75% rate hike later this month.
But while markets generally are feeling pain, investors can still find individual stocks that are set to potentially benefit from today’s environment of rising interest rates – and Wall Street’s stock pros are already picking out these potential winners.
Using TipRanks’ database, we pinpointed two such stocks. These are Strong Buy tickers, according to the analyst community, and both offer double-digit upside potential. Let's find out just what about them has caught the analysts’ attention.
Hancock Whitney Corporation (HWC)
We’ll start with a bank holding company, Hancock Whitney. This firm operates bank branches in the Gulf Coast region, with more than 230 locations in the states of Florida, Alabama, Mississippi, Louisiana, and Texas, and its headquarters in Gulfport, Mississippi. The bank offers the usual full range of retail, small business, and commercial services, including savings and checking accounts, mortgages, business loans, personal credit, online and mobile banking, retirement advising, insurance, and wealth management. In an interesting side note, the firm is the official bank of the New Orleans Saints pro football team.
In its latest quarterly statement, for 2Q22, total revenues reached $331.4 million, in-line with Street expectations. Pre-provision net revenue - the sum of net interest income and non-interest income minus expenses (san loss provisions) - was up $12.4 million, or 9%, year-over-year, to reach $146.9 million. The company’s income, of $121.4 million, was down slightly (1.7%) from the $123.5 million reported in 2Q21. Diluted EPS was listed as $1.38, compared to $1.40 in the year-ago quarter. At the same time that earnings came in slightly lower y/y, it also just edged in higher than the $1.35 EPS forecast.
Like many banking firms, Hancock pays out a modest dividend. The company’s current payment, declared in July for payment this month, was for 27 cents per common share. At this rate, the dividend annualizes to $1.08 and yields a slightly-above-average 2.3%. The key point here is reliability – Hancock Whitney has paid out a dividend in every fiscal quarter since 1967.
In covering this stock for D.A. Davidson, analyst Kevin Fitzsimmons points out just how Hancock Whitney stands to gain as rates go up: “HWC remains an asset sensitive beneficiary of higher rates and an ability to lag on deposit pricing, and we view the bank as well-positioned for additional NIM (net interest margin) expansion in 2H22... We get the sense that 2H22 NIM will increasingly benefit from higher rates, while the remaining excess liquidity will likely get utilized by YE22. While HWC remains quite asset sensitive, we get the sense the bank is looking at adding cash flow hedges to create a more neutral position.”
To this end, Fitzsimmons gives HWC shares a Buy rating and his price target, at $60, implies a one-year upside potential of ~29%. (To watch Fitzsimmons’ track record, click here)
Overall, this bank holding company has picked up 4 recent Wall Street analyst reviews, and all agree: this is a stock to Buy, making the Strong Buy consensus rating unanimous. The shares are priced at $46.59 and their $58.25 average price target suggests an upside of 25% in the next 12 months. (See HWC stock forecast on TipRanks)
From banking we’ll adjust slightly - to fintech, and look at Payoneer. This company has been in the business of online international money transfers and digital payment services since 2005, and now offers services in over 35 languages through 24 global offices to more than 5 million customers worldwide. Payoneer went public through a SPAC transaction in June of last year.
In its most recent quarterly report, it’s fifth as a public company, for 2Q22, Payoneer reported total revenues of $148.2 million, a year-over-year gain of 34%. Net income for Payoneer dropped sequentially in Q2, from Q1’s $20.2 million to the current report’s $4.4 million. Per share, this meant a drop from 6-cent EPS to 1-cent EPS. At the same time, the figure beat Street expectations for EPS of $-0.06. The company has reported two profitable quarters in a row, as opposed to the net losses of the previous three quarters. In addition, the company has well over $5 billion in customer funds on deposit, and cash assets of $492 million.
Commenting on the impact of rising rates on Payoneer, Northland 5-star analyst Michael Grondahl says, "Payoneer's customers maintained $5.1B+ of balances on the Payoneer platform and as interest rates rise this may drive higher interest income."
Getting to the nitty-gritty, Grondahl goes on to say: “Payoneer had a strong 2Q with new customer acquisitions, nice partnerships, a new customer payback period of less than 12 months, and increased adoption of higher value services including B2B AP/AR in many high growth markets including 50% y/y for both volume and revenue growth in Latin America, Southeast Asia, the Middle East, and North Africa.”
Unsurprisingly, Grondahl rates Payoneer shares an Outperform (i.e. Buy) and his $10 price target indicates potential for ~59% upside this coming year. (To watch Grondahl’s track record, click here)
Overall, all five of the most recent analyst reviews on this stock are positive, giving PAYO its coveted Strong Buy consensus rating. The shares have an average price target of $9.13 and a trading price of $6.29, suggesting an upside of ~45% over the next 12 months. (See PAYO stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.