Investments In Carolinas And Texas Will Generate New Opportunities

Key Takeaways

• Investments in talent and expansion in key states aim to drive long-term growth in loans, deposits, and revenue.
  
• Strategic focus on high-fee revenues and disciplined deposit management enhance net interest margins and earnings stability.
  
• Economic uncertainties and potential credit quality issues pose risks to revenue, earnings, and growth, with competitive pressures challenging deposit strategies.

Catalysts

Operates as the bank holding company for The Huntington National Bank that provides commercial, consumer, and mortgage banking services in the United States.

• Huntington Bancshares has made significant investments in talent acquisition and business expansion in North and South Carolina, as well as Texas, which are expected to drive long-term loan and deposit growth and revenue increases.
  
• The company's focus on expanding high-fee revenue areas such as payments, wealth management, and capital markets is contributing to a strong increase in fee income, potentially boosting net margins due to higher-margin service revenues.
  
• Huntington's disciplined approach to deposit pricing and successful execution of deposit betas is enhancing its net interest margin, which should lead to increased net interest income.
  
• The approval of a $1 billion multiyear share repurchase authorization by the Board provides flexibility for capital deployment and is expected to support earnings per share (EPS) growth over the coming years.
  
• Huntington's strategic investments in risk management and maintaining a strong capital position with high levels of liquidity and a robust allowance for credit losses above peer medians is likely to support consistent credit performance and steady earnings growth, even through economic uncertainties.

Huntington Bancshares Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Huntington Bancshares's revenue will grow by 6.7% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 27.0% today to 26.8% in 3 years time.
• Analysts expect earnings to reach $2.3 billion (and earnings per share of $1.61) by about April 2028, up from $1.9 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.6 billion in earnings, and the most bearish expecting $1.8 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.3x on those 2028 earnings, up from 10.6x today. This future PE is greater than the current PE for the US Banks industry at 10.7x.
• Analysts expect the number of shares outstanding to grow by 0.52% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.49%, as per the Simply Wall St company report.

Huntington Bancshares Future Earnings Per Share Growth

Risks

• The probability of adverse economic scenarios has increased, which could create additional headwinds, potentially impacting future revenue and earnings.
  
• Economic uncertainty and potential tariff issues might defer some business activities, affecting short-term growth and net interest income.
  
• The potential increase in criticized assets may indicate emerging credit quality issues, which might negatively affect net margins and earnings.
  
• Continued execution of loan growth may come under pressure if economic conditions worsen, impacting future revenue growth projections.
  
• The reliance on maintaining strong deposit growth and pricing might be challenged if competitive pressures increase, affecting net interest margins and earnings.

Valuation

• The analysts have a consensus price target of $17.205 for Huntington Bancshares based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $19.0, and the most bearish reporting a price target of just $14.9.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $8.6 billion, earnings will come to $2.3 billion, and it would be trading on a PE ratio of 13.3x, assuming you use a discount rate of 6.5%.
  
• Given the current share price of $13.93, the analyst price target of $17.21 is 19.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.