It has been about a month since the last earnings report for Hancock Whitney (HWC). Shares have added about 1% in that time frame, underperforming 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 Meets Q3 Earnings, Revenues Rise Y/Y

Hancock Whitney’s third-quarter 2022 earnings of $1.55 per share were in line with the Zacks Consensus Estimate. The bottom line rose 6.9% from the prior-year quarter’s adjusted earnings of $1.45.

Results benefited from higher net interest income, a rise in loan balance and increasing rates. However, lower non-interest income, mainly due to rising mortgage rates, was the undermining factor. Also, higher adjusted expenses and a rise in provisions were the other quarterly headwinds.

The net income came in at $135.4 million, rising 4.5% year over year.

Revenues & Adjusted Expenses Rise

Total revenues were $365.6 million, up 11.5% year over year. The top line also marginally surpassed the Zacks Consensus Estimate of $365 million.

The NII (on a tax-equivalent basis) jumped 19.1% to $282.9 million. The net interest margin was 3.54%, rising 60 basis points (bps).

Non-interest income was $85.3 million, declining 8.6%. A drastic fall in secondary mortgage market operations fees mainly led to this decrease.

Total non-interest expenses declined almost 1% to $193.5 million. Excluding last year’s non-operations charges, the adjusted expenses rose 1.1%.

The efficiency ratio decreased to 51.62% from 57.44% in the year-ago quarter. A decline in the efficiency ratio indicates an improvement in profitability.

As of Sep 30, 2022, total loans were $22.6 billion, up 4.3% from prior-quarter end. The total deposits declined 3.1% to $29.2 billion.

Credit Quality: Mixed Bag

The provision for loan losses was $1.4 million against a benefit of $27 million in the prior-year quarter.

The net charge-offs (annualized) were 0.02% of average total loans, down from 0.03% in the last year's quarter. The total non-performing assets plunged 39% from the prior-year quarter to $43.8 million.

Capital & Profitability Ratios Solid

As of Sep 30, 2022, the Tier 1 leverage ratio was 9.27%, up from 8.15% at the end of the year-earlier quarter. The common equity Tier 1 ratio was 11.12% compared with 11.17% as of Sep 30, 2021.

At the end of the third quarter, the return on average assets was 1.56%, up from the year-ago period’s 1.46%. The return on average common equity was 15.77%, up from 14.26% in the prior-year quarter.

Share Repurchase Update

During the quarter, Hancock Whitney repurchased 50,000 shares at an average price of $48.02 per share.

2022 Outlook

Management projects core loans (excluding Paycheck Protection Program or PPP loans) to grow 8-9%, up from the prior mentioned 6-8% rise. The company expects loan growth to moderate in the fourth quarter.

The company expects deposits to be down 3-4%, with seasonal growth projected in the fourth quarter. Prior to this, deposits were expected to be flat to slightly down.

The NIM is expected to continue widening on expected future rate hikes. The company anticipates every 25 bps rise in the Fed Funds rate to widen NIM by 2-3 bps.

Non-interest income is anticipated to be down 3-4% year over year, changed from the previously stated 1-3% decline. In the fourth quarter, non-interest income is expected to decline marginally on a sequential basis.

Operating pre-provision net revenues are projected to be up 20% year over year, up from the prior guidance range of 16-18%.

Operating expenses are projected to decline marginally year over year, changed from the prior mentioned decline of 1-3%. In the fourth quarter, expenses are expected to rise marginally, sequentially.

Reserve for credit losses will be driven by future assumptions in economic forecasts and any change in the company’s asset quality metrics. Management expects low to moderate charge-offs for the fourth quarter.

The efficiency ratio is targeted to be below 55%. In the fourth quarter, the ratio is anticipated to be 50%.

The effective tax rate is anticipated to be 21%.

Three-Year Corporate Strategic Objectives (to be Achieved by 4Q24)

Return on assets of 1.35-1.45% is expected.

Tangible common equity (TCE) of more than 8% is anticipated.

Return on TCE is expected to be more than 15%.

The efficiency ratio of less than or equal to 55% is targeted.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Hancock Whitney has an average Growth Score of C, though it is lagging a bit on the Momentum Score front 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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.

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