Rising earnings estimates on the back of strong third-quarter
results and the payment of a special cash dividend have aided
Heartland Financial USA Inc.
) achieve a Zacks #1 Rank (Strong Buy) on January 1. Moreover,
this regional bank has delivered positive earnings surprises in
three of the last four quarters with an average beat of 50.8%.
With a solid return of 67.8% in a year's time, a long-term
earnings growth projection of 4% and a decent dividend yield of
1.5%, Heartland Financial offers an attractive investment
The Rank Driver
Better-than-expected third-quarter earnings, improving credit
quality, completion of two acquisitions - First Shares Inc. and
Heritage Bank - and the special cash dividend are the primary
rank drivers for this stock.
On October 29, 2012, Heartland Financial reported third-quarter
earnings of 75 cents per share, surpassing the Zacks Consensus
Estimate by 15.4% and last year's earnings by 275.0%. An improved
top-line growth was partially offset by higher operating
Net interest income was $36.8 million, up 1.6% from the year-ago
quarter on the back of lower total interest expense. Non-interest
income surged significantly to $29.8 million, driven by higher
gains on sale of loans. Yet, non-interest expense escalated 48.0%
to $47.2 million as a result of rising salaries and employee
Asset quality continued to show an improvement at Heartland
Financial during the third quarter. As of September 30, 2012, the
ratio of nonperforming assets to total assets was 1.68%, down 104
basis points year over year. Furthermore, allowance for loan and
lease losses was $40.4 million, declining 8.6% from $44.2 million
in the prior-year quarter.
Moreover, Heartland Financial is one of the few banks that have
maintained regular dividend payments throughout the financial
crisis. Further on December 28, the company paid a special cash
dividend of 10 cents per share.
Earnings Estimates Advances
Over the last 90 days, the Zacks Consensus Estimate for 2012
jumped 4.4% to $2.86 per share, implying year-over-year growth of
132.4%. For 2013, the Zacks Consensus Estimate increased 2.6% to
$2.39 over the same time frame.
On a price-to-book basis, the shares of Heartland Financial
currently trade at 1.4x, a 27% premium to the industry median of
1.1. The valuation on a price-to-earnings basis looks attractive
given the shares trade at a forward P/E of 9.4x, a 15% discount
to the 11.1x for the industry average.
Moreover, Heartland Financial has a trailing 12-month ROE of
15.4% compared with the peer group average of 8.8%. This implies
that the company reinvests its earnings more efficiently than its
About The Company
Headquartered in Dubuque, Iowa, Heartland Financial provides
various banking products and services. The company focuses
primarily on clients in the Midwestern, Southwestern and Western
United States, to whom it delivers high-quality financial
products and services. Founded in 1981, the company conducts
business through 65 full-service banking locations. The company
has a market capital of roughly $431.7 million. Other Zacks #1
Rank bank stocks include
Old National Bancorp.
HEARTLAND FINCL (HTLF): Free Stock Analysis
OLD NATL BCP (ONB): Free Stock Analysis
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