Acquisition And Hiring Will Strengthen US Banking Resilience

Key Takeaways

• Continued hiring in high-growth markets and Sabal Trust Company acquisition are expected to enhance revenue growth and loan expansion.
  
• Share repurchase program and rate-cut expectations aim to boost EPS and maintain earnings resilience amidst interest rate fluctuations.
  
• Economic uncertainty, credit risks, seasonal outflows, and integration expenses may hinder Hancock Whitney's revenue, earnings, and profitability amidst evolving market conditions.

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 in the United States.

• The acquisition of Sabal Trust Company is projected to close soon, with expectations to enhance noninterest income by 9% to 10% year-over-year, contributing to overall revenue growth.
  
• The company plans to continue hiring revenue producers, with a target of adding 20 to 30 new personnel, particularly in high growth markets like Texas and Florida, which is expected to drive loan growth and increase revenue.
  
• The repricing of CDs at lower rates and favorable funding mix adjustments have been guiding a modest expansion in net interest margin (NIM) and net interest income (NII) growth of 3% to 4% in 2025, thus supporting earnings growth.
  
• Hancock Whitney intends to continue its share repurchase program at similar or slightly higher levels, which could boost EPS through reduced share count.
  
• The expectation of 3 rate cuts over the remainder of 2025 is anticipated to lower deposit costs further, offsetting lower loan yields, and contributing to margin stability and earnings resilience despite interest rate fluctuations.

Hancock Whitney Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Hancock Whitney's revenue will grow by 7.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 33.5% today to 28.8% in 3 years time.
• Analysts expect earnings to reach $502.7 million (and earnings per share of $5.94) by about April 2028, up from $468.9 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 12.6x on those 2028 earnings, up from 9.2x 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 decline by 0.69% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.21%, as per the Simply Wall St company report.

Hancock Whitney Future Earnings Per Share Growth

Risks

• Economic uncertainty and rapidly evolving conditions may hinder Hancock Whitney's ability to project results accurately, potentially impacting future revenue and earnings.
  
• Loan growth outlook is tempered by higher payoffs and uncertainty in client sentiment, which may affect net interest margins and future earnings.
  
• Concerns about tariffs and potential macroeconomic impacts on small businesses pose credit risks, potentially affecting earnings through increased provisions for credit losses.
  
• Seasonal outflows and a decline in deposits, combined with challenges in attracting new hires for revenue generation, may limit capital available for loan growth and impact overall revenue.
  
• Increased expenses are expected from the Sabal Trust transaction, and any inefficiencies in integrating or controlling costs may reduce net margins and overall profitability.

Valuation

• The analysts have a consensus price target of $62.875 for Hancock Whitney 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 $70.0, and the most bearish reporting a price target of just $54.0.
• 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 $502.7 million, and it would be trading on a PE ratio of 12.6x, assuming you use a discount rate of 6.2%.
• Given the current share price of $49.96, the analyst price target of $62.88 is 20.5% 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.