The Zacks Analyst Blog Highlights: Wintrust Financial, Hancock Holding, First Horizon National, Independent Bank and Andersons
CHICAGO, April 15, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Wintrust Financial Corporation (Nasdaq:WTFC-Free Report), Hancock Holding Company (Nasdaq:HBHC-Free Report), First Horizon National Corporation (NYSE:FHN-Free Report), Independent Bank Corp. (Nasdaq:INDB-Free Report) and Andersons Inc. (Nasdaq:ANDE-Free Report) .
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
4 Banks Poised for an Earnings Beat
As a broader part of the financial sector, U.S. banks & thrifts draw significant attention. Since the beginning of 2014, the backdrop has been tough for the banks with weak consumer and corporate activities, lackluster mortgage banking activities, soft trading volumes and mounting legal costs. Further, unlike last year, reserve releases are not expected to support bottom-line growth.
Additionally, revenue growth is expected to remain sluggish owing to lack of significant loan growth (mainly the home equity lines of credit) and continued pressure on net interest margins from a still nagging low rate environment. Consequently, banks are slowly moderating their lending standards and moving toward higher fees to avoid pressure on top line.
Nevertheless, continued expense control measures and stable balance sheets will act as positives. Also, favorable equity market and gradually improving macroeconomic factors are expected to act as tailwinds. Obviously, banks that depend less on risky activities and resort to other profit-making ways would have a brighter future.
Stringent regulations continue to affect their investment activities and increase compliance costs. Also, stricter capital requirements add to the woes. As a result, banks & thrifts are expected to report 15.6% earnings decline in the first quarter of 2014.
(For a detailed look at the earnings outlook for this sector and others, please read our Earnings Trends report.)
Though the overall scenario seems dismal, you can turn the odds in your favor. As a reflection of the weakness in the sector, bank stocks look relatively cheaper now. Therefore selecting a few banking stocks with a huge short-term growth potential should yield a solid return.
We have picked a handful of stocks that will likely beat earnings estimates in their upcoming release. An earnings beat will raise investors' confidence in these stocks, leading to rapid price appreciation.
How to Select the Right Stocks
Choosing the right stocks could be quite difficult unless one knows the method. One way of doing so is by selecting stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) – and a positive Zacks Earnings ESP.
Earnings ESP is our proprietary methodology for identifying stocks that have the best chance to surprise with their upcoming earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, chance of a positive earnings surprise are as high as 70%.
Here are 4 banking stocks that have the right combination of elements to deliver an earnings beat when they release their earnings later this week:
Wintrust Financial Corporation (Nasdaq:WTFC-Free Report) carries a Zacks Rank #3 and has an earnings ESP of +3.03%. The Zacks Consensus Estimate for the first quarter is 66 cents per share.
Based in Rosemont, Illinois, Wintrust Financial is a bank holding company. It offers banking services, trust and investment services, commercial insurance premium financing, short-term accounts receivable financing as well as certain administrative services.
- Wintrust Financial is scheduled to report first-quarter 2014 results after the market closes on Apr 15.
Hancock Holding Company (Nasdaq:HBHC-Free Report) has a Zacks Rank #3 and an earnings ESP of +1.75%. The Zacks Consensus Estimate for the first quarter is 57 cents per share.
Based in Gulfport, MS, Hancock Holding is a bank holding as well as financial holding company. The company is the parent company of 2 wholly owned bank subsidiaries, Hancock Bank and Whitney Bank.
- Hancock Holding is slated to report first-quarter 2014 results after the market closes on Apr 16.
First Horizon National Corporation (NYSE:FHN-Free Report) has a Zacks Rank #3 and an earnings ESP of +6.67%. The Zacks Consensus Estimate for the first quarter is 15 cents per share.
First Horizon is financial services company based in Memphis, Tennessee. It is the holding company for First Tennessee Bank and FTN Financial. First Tennessee Bank offers deposit products, loans, investments, insurance, financial planning, trusts, asset management and cash management services. FTN Financial provides capital markets and investment banking services.
The company has registered an average positive earnings surprise of 3.5% over the trailing 4 quarters.
- First Horizon will announce its first quarter 2014 results before the opening bell on Apr 17.
Independent Bank Corp. (Nasdaq:INDB-Free Report) is a Zacks Rank #3 stock with an earnings ESP of +3.64%. The Zacks Consensus Estimate for first-quarter 2014 is 55 cents per share.
Headquartered in Massachusetts, Independent Bank Corp is the holding company for Rockland Trust Company. Through its banking subsidiary, the company offers a wide range of banking, investment and insurance services in Eastern Massachusetts and Rhode Island.
The company has registered an average positive earnings surprise of 2.3% over the trailing 12 months.
- Independent Bank Corp is scheduled to announce first-quarter results after the market closes on Apr 17.
Going Forward
Despite the expected pressure on bank earnings this quarter, investors have to be patient from a long-term investment perspective. Though we don't see banks returning to their pre-crisis level any time soon, these financial institutions are encountering challenges upfront and growing at a moderate pace. Further, a favorable equity and asset market backdrop, and encouraging macroeconomic factors – such as falling unemployment, a progressive housing sector and flexible monetary policy – should pave way for further stability.
The Andersons Upgraded to Strong Buy
On Apr 12, Zacks Investment Research upgraded The Andersons Inc. (Nasdaq:ANDE-Free Report), a diversified company operating in six different business segments ranging from buying, selling and storing grain to leasing railcars and running retail stores catering to the latest home hardware needs, to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The share price and earnings estimates of Andersons have been trending upward, following its record fourth-quarter 2013 results on Feb 12. Adjusted earnings moved up an impressive 104% to $1.08 from 53 cents (adjusted to reflect the company's Feb 2014 three-for-two stock split) earned in the year-ago quarter. Results beat the Zacks Consensus Estimate of $1.05, delivering a positive earnings surprise of 2.86%, the third straight quarter of a positive earnings surprise.
For full-year 2013, Andersons reported earnings per share of $3.18, up 12.7% from $2.82 (adjusted to reflect the company's Feb 2014 three-for-two stock split) in 2012. Segment wise, the Ethanol Group had record operating income in 2013 and a best ever fourth quarter, reversing the loss incurred in the prior-year comparable period, attributed to strong ethanol margins. The Rail Group was close to the record 2012 results. The Turf and Specialty Group had a record year, with more than double the prior-year results. Despite unfavorable impacts of the 2012 drought, the Grain Group performed well, helped by strong earnings of the Lansing Trade Group.
Andersons will benefit from its activities on the acquisition front in 2013. The acquisition of Blenheim, Ontario-based Thompsons Ltd., a grain and food-grade bean handler and Mile Rail, LLC, a provider of agronomy input as well as railcar repair and cleaning equipment will be accretive to earnings for full-year 2014. In December, Andersons finalized the acquisition of the granulation manufacturer, Cycle Group, Inc. The company purchased the assets of Cycle Group to geographically expand the Turf & Specialty Group's granulation business. In addition, the acquisition will increase the company's production and distribution capabilities in the high-value markets of the granular business and help to serve customers better.
The Agricultural Group is expected to benefit from the record corn crop seen in 2013 and the anticipated sizable corn crop in 2014. The Rail, Grain and Plant and Nutrients Groups are also expected to perform well.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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