On May 30, we reiterated our Outperform recommendation on
Hilltop Holdings Inc.
) based on its strong first-quarter 2013 results and business
diversification following the acquisition of Plains Capital Corp.
in Nov 2012.
Why the Retention?
Estimates for this bank holding company and property-casualty
insurer have remained steady since the company reported its
first-quarter 2013 results on May 6.
Hilltop reported first-quarter 2013 operating earnings per
shareof 39 cents and revenues of $280.5 million modestly exceeded
the Zacks Consensus Estimate for earnings of 31 cents and
revenues of $273 million, respectively. Both earnings and top
line also stood higher than the year-ago results of 1 cent per
share and $38.1 million, respectively.
The remarkable upside was driven by improved premiums,
interest and non-interest income along with lower-than-expected
underwriting and other expenses, which also resulted in improved
A diversified business mix and adequate liquidity signify
consistent growth ahead. The Zacks Consensus Estimate for 2013
rose 2.3% to $1.33 per share, while it remained static at $1.29
per share for 2014, over the last 30 days. Consequently, with the
Zacks Consensus Estimate for 2013 depicting slight upward
pressure on the stock in the near term, Hilltop now has a Zacks
Rank #2 (Buy).
What is the cause for the strong positive bias on the company?
Hilltop's fundamentals look compelling following the
PlainsCapital acquisition and have boosted the company's
operating and competitive efficiencies. On one hand, higher
premiums, deposits, interest and non-interest income showcase
Hilltop enjoys a healthy and risk-free balance sheet with a
strong investment portfolio and operating cash flow. A sturdy
risk-based capitalization also reflects a stable and adequate
financial surplus and debt leverage outlook for the company.
Other Stocks to Consider
Apart from Hilltop, other stocks that are outperforming in the
insurance sector include
Assured Guaranty Ltd.
XL Group Plc
Old Republic International Corp.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
ASSURED GUARNTY (AGO): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
OLD REP INTL (ORI): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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