Acquisition Of Sabal Trust And Expansion Into Florida And Texas Will Boost Market Position

Key Takeaways

• Acquisition of Sabal Trust Company and organic expansion plans boost revenue and market presence in Florida and Texas.
  
• Continued NIM expansion and increased loan production enhance net income, earnings per share, and shareholder returns.
  
• Economic and competitive pressures, along with credit quality concerns and expansion risks, could significantly impact Hancock Whitney's financial performance and growth prospects.

Catalysts

Operates as the financial holding company for Hancock Whitney Bank that provides traditional and online banking services to commercial, small business, and retail customers.

• Hancock Whitney's acquisition of Sabal Trust Company is expected to significantly expand its wealth management fee market in Florida, enhancing future fee income and improving revenue streams.
  
• The multiyear organic growth plan, including hiring new revenue-generating associates and expanding their footprint in key growth areas like Florida and Texas, is likely to bolster revenue through increased market coverage and business scale.
  
• The anticipation of continued NIM (Net Interest Margin) expansion due to lower deposit costs and favorable funding mix is expected to contribute positively to net interest income and overall earnings.
  
• The planned increase in loan production, particularly in sectors like commercial real estate, combined with strategies to achieve higher yields and relationship revenue, is poised to drive mid-single-digit loan growth, impacting net margins and earnings positively in the latter part of 2025.
  
• Share repurchases are set to continue, which, along with strong capital ratios, could potentially enhance earnings per share (EPS) and provide a favorable impact on stock valuation and shareholder returns.

Hancock Whitney Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Hancock Whitney's revenue will grow by 7.1% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 32.8% today to 29.4% in 3 years time.
• Analysts expect earnings to reach $503.7 million (and earnings per share of $5.94) by about January 2028, up from $457.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.9x on those 2028 earnings, up from 11.2x today. This future PE is greater than the current PE for the US Banks industry at 12.3x.
• Analysts expect the number of shares outstanding to decline by 0.49% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.92%, as per the Simply Wall St company report.

Hancock Whitney Future Earnings Per Share Growth

Risks

• Economic uncertainty and rapidly changing environments could lead to inaccurate projections or unexpected negative impacts on financial performance, which may affect future revenue and net margins.
  
• Fee income was modestly down due to lower secondary mortgage volume caused by higher interest rates, which indicates vulnerability to interest rate fluctuations and could impact earnings.
  
• High competition in the commercial real estate and equipment finance sectors may lead to pressure on loan yields, affecting net interest margins and profitability.
  
• Rising non-accrual and criticized commercial loans reflect potential credit quality concerns, which could increase charge-offs and provisions, impacting net earnings.
  
• Dependence on strategic expansion in higher growth areas like Florida and Texas, if not executed well, could lead to underperformance relative to expectations and impact revenue growth.

Valuation

• The analysts have a consensus price target of $70.03 for Hancock Whitney based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.7 billion, earnings will come to $503.7 million, and it would be trading on a PE ratio of 13.9x, assuming you use a discount rate of 5.9%.
• Given the current share price of $59.6, the analyst's price target of $70.03 is 14.9% 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.