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Hancock Whitney (HWC) Up 2.2% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Hancock Whitney (HWC). Shares have added about 2.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Hancock Whitney Q2 Earnings & Revenue Beat, Expenses Up

Hancock Whitney’s second-quarter 2021 adjusted earnings per share of $1.37 surpassed the Zacks Consensus Estimate of $1.15. The bottom line improved significantly from the prior-year quarter’s loss of $1.36.

Results gained from an increase in non-interest income and provision benefits. Deposit balance improved during the quarter. However, decline in net interest income, reflecting lower interest rates and soft loan demand, and higher expenses were headwinds.
 
Results in the reported quarter excluded the impact of non-operating items. Including these, net income came in at $88.7 million against net loss of $117.1 million incurred in the prior-year quarter.

Revenues Improve, Expenses Rise

Total revenues were $328.9 million, up 5.5% year over year. The top line beat the Zacks Consensus Estimate of $316.6 million.  

Net interest income (NII) on a fully-tax-equivalent (FTE) basis declined 1.5% to $237.5 million. NIM on FTE basis was 2.96%, contracting 27 basis points (bps).

Non-interest income was $94.3 million, surging 27.5%. The upswing was driven by a rise in almost all fee income components.

Total non-interest expenses jumped 20.5% year over year to $236.8 million, mainly due to a rise in other expenses and personnel expenses.

As of Jun 30, 2021, total loans were $21.1 billion, down 2.4% from the prior-quarter end. Total deposits were up marginally to $29.3 billion.

Credit Quality Improves

Provision for loan losses was a benefit of $17.2 million against a provision of $306.9 million in the prior-year quarter. Net charge-offs (annualized) were 0.20% of average total loans, down 510 bps from the year-ago quarter.

Total non-performing assets plummeted 54.1% to $97.6 million.

Capital Ratios Strong

As of Jun 30, 2021, Tier 1 leverage ratio was 7.83%, up from 7.37% at the end of the year-earlier quarter. Tier 1 risk-based capital ratio was 10.98%, up from 9.78% as of Jun 30, 2020.

Third-Quarter 2021 Outlook

The company expects up to $750 million worth of paycheck protection program (PPP) loans to be forgiven. Total core loans (excluding PPP) are expected to up $200-$300 million sequentially.

Total deposits are expected to be up $150-$200 million.

The company forecasts NIM contraction of nearly 4 bps due to excess liquidity and PPP forgiveness, while NII (FTE) is likely to remain relatively stable or fall modestly on a sequential basis.

Further, fee income is expected to be down $3-$5 million from second-quarter 2021.

Management expects modest reserve release.

Non-interest expenses (excluding one-time early retirement costs) are expected to be flat.

Effective tax rate is anticipated to be 19-20%.

Full-Year 2021 Outlook

Management expects total core loans to be up $400-$600 million for the fourth quarter and end the year at nearly $20.4 billion.

Total deposits are expected to be stable in the fourth quarter and end the year at roughly $29.5 billion.

NIM is expected to contract 5 bps in the last quarter of the year on a sequential basis and be down nearly 30 bps for the full year.

NII is anticipated to be down 1-2%, mainly due to lower rates, PPP forgiveness and limited loan growth. Management projects majority of PPP loans to be forgiven by 2021-end, which will result in a total remaining balance in the range of $300-$400 million.

Fee income is expected to rise 7-9% as improvements in most fee categories are likely to be partially offset by lower secondary mortgage fees.

Non-interest expenses (excluding the second quarter non-operating items) are anticipated to be down 3-4%, with fourth-quarter 2021 expense level of $187 million, a run-rate for 2022 overall expenses.

Effective tax rate is anticipated to be 19-20%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 9.24% due to these changes.

VGM Scores

At this time, Hancock Whitney has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, 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 B. 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 looks promising. Notably, Hancock Whitney has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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