On January 9, we upgraded
Hilltop Holdings Inc.
) to Outperform from Neutral based on the recent PlainsCapital
acquisition. This property-casualty (P&C) insurer secured a
Zacks Rank #1 (Strong Buy) shortly after closing the acquisition
Why the Upgrade?
Hilltop's third-quarter 2012 loss came in at 7 cents a share,
well below the Zacks Consensus Estimate of earnings of 1 cent per
share. The company broke-even in the year-ago quarter. Revenues
climbed 5.5% year over year to $42.8 million, also breezing past
the Zacks Consensus Estimate of $42.0 million. Over the past four
quarters, Hilltop has delivered an average negative surprise of
Following the release of the third quarter results, the Zacks
Consensus Estimate of a loss for 2012 has gone up 31.3% to 21
cents per share. However, the Zacks Consensus Estimate for 2013
earnings grew 5.0% to $1.25 per share, reflecting a positive
outlook post PlainsCapital acquisition.
Hilltop's growth story appears gripping, particularly, after
it completed the acquisition of the U.S.-based financial services
company - PlainsCapital Corp. - for about $700 million,on
December 3.The acquisition is consistent with Hilltop's growth
goals and will help it fortify the company's market position in
the primary operating markets of Texas, Oklahoma, Georgia,
Tennessee and Arizona.
The acquisition is set to help Hilltop diversify its
operations from core P&C insurance to profitable banking
operation. PlainsCapital is a highly lucrative $1 billion banking
entity that benefits from the ongoing low interest rate
environment and the refining housing sector, as these factors
provide promising opportunities for investors to park their funds
in such high-quality banks.
As expected, Hilltop witnessed an immediate ascent in its
market price following the successful culmination of the
acquisition. A stable ratings outlook and a share buyback program
further raise shareholders' confidence.
Other Stocks to Consider
Besides Hilltop, other stocks in the P&C sector that are
currently performing well include
Homeowners Choice Inc.
HCC Insurance Holdings Inc.
). Both the companies carry a Zacks Rank #1(Strong Buy).
HCC INS HLDGS (HCC): Free Stock Analysis
HOMEOWNERS CHCE (HCI): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
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