Friday, August 16, 2013

Hancock Initiated at Neutral - Analyst Blog

On Jul 3, we initiated our coverage on regional bank, Hancock Holding Company (HBHC) at Neutral, based on its strong organic and inorganic growth prospects. However, persistently rising operating expenses, a low rate environment and increased regulations remain major causes of concern.

Why the Neutral Stance?

Hancock's focus on its organic growth strategy as well as expansion through acquisitions prompted us to initiate with this stance. Further, the company continues to build capital, resulting in a better financial position that will help in fulfilling the stringent capital requirements. Moreover, with a strong liquidity position and meaningful capital deployment, Hancock remains an asset for yield-seeking investors.

Nevertheless, due to the low interest rate environment, Hancock is expected to continue experiencing pressure on its net interest margin. Moreover, increased non-interest expenses and significant exposure to real estate markets remain major causes of concern for the company. In addition, Hancock's profitability remains subject to the stringent regulatory landscape.

Further, in the first quarter of 2013, Hancock lagged the Zacks Consensus Estimate due to decreased revenues and higher operating expenses. The company is scheduled to announce its second-quarter results on Jul 25.

The Zacks Consensus Estimate for the quarter is pegged at 56 cents per share. The Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) for Hancock is +1.79% for the second quarter. This, along with its Zacks Rank #3 (Hold), makes it likely for the company to report a positive earnings surprise.

Other Stocks to Consider

Other stocks in the same industry that are currently performing well include Capital City Bank Group Inc. (CCBG), SY Bancorp Inc. (SYBT) and WesBanco Inc. (WSBC). All of them carry a Zacks Rank #1 (Strong Buy).

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