On Mar 21, we reiterated our Outperform recommendation on
Hilltop Holdings Inc.
) based on its recent business expansion following the
acquisition of PlainsCapital Corp. in Nov 2012.
Why the Retention?
Estimates for Hilltop, the newly-turned bank holding company
that continues to be a property-casualty insurer as well, have
witnessed radical escalation since it reported amplified top line
and balance sheet in its fourth-quarter 2012 results, on Mar
Hilltop's fourth quarter earnings per share (EPS) as well as
revenues of 13 cents and $139 million topped the Zacks Consensus
Estimate of 8 cents and $52 million, respectively. Both EPS and
top line also stood higher than year-ago results.
Improved results and expanded business operations signify
noticeable growth ahead. The Zacks Consensus Estimate for 2013
rose 3.2% to $1.30 per share, whereas it grew 1.7% to $5.06 per
share for 2014, over the last 7 days. Meanwhile, the Most
Accurate Estimate for Hilltop's 2013 earnings stands at $1.40,
resulting in a positive ESP (read:
Zacks Earnings ESP: A Better Method
) of 7.7%.
Consequently, with the Zacks Consensus Estimates for both 2013
and 2014 showing steady upward pressure on the stock in the near
term, Hilltop now has a Zacks Rank #1 (Strong Buy).
What is the cause for the strong positive bias on the company?
The recent PlainsCapital acquisition has not only inflated the
company's assets, but also boosted its investment portfolio and
cash flows, paving the way for efficient capital deployment.
Moreover, the deal has helped Hilltop diversify its operations
from core property-casualty (P&C) insurance toward a
profitable banking operation, thereby enhancing the company's
operating and competitive efficiencies. Strong capitalization and
stable ratings outlook further raise shareholders'
On the other hand, effective distribution initiatives are also
helping NLASCO, the insurance arm of Hilltop, to generate higher
premiums. We believe Hilltop should continue to tread ahead with
its strategic approach in order to capitalize on the
opportunities that the markets provide on stabilization.
Other Stocks to Consider
Apart from Hilltop, other stocks that are outperforming in the
financial sector include
XL Group Plc
Navigators Group Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
HILLTOP HLDGS (HTH): Free Stock Analysis
NAVIGATORS GRP (NAVG): Free Stock Analysis
PROGRESSIVE COR (PGR): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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