On Nov 15, we upgraded our recommendation on
Hilltop Holdings Inc.
) to Outperform, based on its consistently strong financial
results since the acquisition of PlainsCapital in Nov 2012.
Strong fundamentals signal steady improvement in the upcoming
quarters as well.
Why the Upgrade?
Estimates for this bank holding company and property-casualty
insurer have been steadily rising since the company reported
third-quarter 2013 results on Nov 12. Hilltop reported
third-quarter operating earnings per share of 36 cents and
revenues of $285 million, both of which modestly exceeded the
Zacks Consensus Estimate for earnings of 31 cents a share and
revenues of $263 million, respectively.
Both earnings and top line were also significantly higher than
the year-ago quarter results of a loss of 7 cents per share and
The notable upside was driven by improved premiums, interest
and non-interest income, along with lower-than-expected loss
adjusted expenses and provision for loan losses, which also
resulted in an improved combined ratio. While underwriting,
interest and non-interest expenses rose, operating cash flow and
capital ratios improved.
A diversified business mix and adequate liquidity signify
potential for consistent growth going forward. The Zacks
Consensus Estimate for 2013 rose 5.5% to $1.34 per share, whereas
it increased 9.6% to $1.60 per share for 2014, over the last 7
days. Consequently, with the Zacks Consensus Estimate for both
2013 and 2014 depicting clear upward pressure in the near term,
Hilltop now has a Zacks Rank #1 (Strong Buy).
While the PlainsCapital acquisition has boosted the company's
operating and competitive efficiencies over the past few
quarters, the latest FNB acquisition further amplifies the
company's asset-base, earnings potential and retail network.
Moreover, Hilltop enjoys a diversified business-mix, a strong
investment portfolio and operating cash flow. A sturdy risk-based
capitalization also reflects adequate financial surplus and a
risk-free balance sheet for the company.
Other Worthy Stocks to Consider
Apart from Hilltop, other stocks that are outperforming in the
insurance sector include
Aspen Insurance Holdings Ltd.
CNA Financial Corp.
Hallmark Financial Services Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
ASPEN INS HLDGS (AHL): Free Stock Analysis
CNA FINL CORP (CNA): Free Stock Analysis
HALLMARK FINL (HALL): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
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