On Mar 19, Zacks Investment Research upgraded
Hilltop Holdings Inc.
) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Following a solid fourth-quarter 2012 earnings, Hilltop has
been witnessing appreciation in its earnings estimates. In an
effort to diversify its operations from core P&C insurance
toward a profitable banking operation, this property-casualty
(P&C) insurer acquired PlainsCapital Corp.- a highly
lucrative $1 billion banking entity - on Nov 30. The acquisition
will add significant stability and visibility to the operating
leverage in the future.
On Mar 15, Hilltop reported fourth-quarter 2012 earnings of 10
cents per share, improving from the Zacks Consensus Estimate of 8
cents and year-ago period's earnings of 9 cents a share. Earnings
were primarily aided by higher revenue that escalated to $134.9
million, ahead of both the Zacks Consensus Estimate of $52.0
million as well as the year-ago quarter's $38.2 million.
Higher interest and non-interest income led by the
incorporation of PlainsCapital's financials for Dec 2012
contributed to the upside in earnings. Further, the acquisition
enhanced total assets to $7.29 billion at 2012-end from $925.4 at
2011-end. Hilltop remains well capitalized with Tier 1 leverage
ratio of 13.08% and total capital ratio of 17.81% at 2012-end,
all well above the regulatory requirements.
PlainsCapital is expected to be highly accretive to earnings
from 2013 onward. Hilltop's P&C insurance segment (NLASCO)
and free cash of $200 million at 2012-end, should further
position it to generate higher growth in the future.
Subsequently, the Zacks Consensus Estimate for 2013 increased
3.2% to $1.30 per share, over the last 7 days. For 2014,
estimates improved 1.6% to $1.29 per share, over the last 7 days.
No downward revisions have been witnessed for both the years.
Moreover, 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 7.69%.
Other Stocks to Consider
Apart from Hilltop, other stocks that are outperforming in the
insurance sector include
EMC Insurance Group Inc.
XL Group Plc
Navigators Group Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
EMC INSURANCE (EMCI): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
NAVIGATORS GRP (NAVG): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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