Financial services firm Stephens updated its outlook on Hilltop Holdings (NYSE: NYSE:HTH), raising the price target to $34.00 from $33.00, while maintaining an Equal Weight rating on the stock in the wake of Hilltop Holdings' second-quarter financial results, which showed positive developments in the mortgage sector and consistent performance in broker/dealer activities, despite weaker trends in Net Interest Income (NII).
An analyst from Stephens noted that the second-quarter performance of Hilltop Holdings was marked by improving mortgage trends and stable broker/dealer activity, but was tempered by sluggish NII trends. The company's updated guidance presented a mixed picture, with a stronger outlook for mortgage fees counterbalanced by a softer projection for NII.
Looking ahead, the firm expressed the belief that 2024 would mark an earnings per share (EPS) trough for the cycle, with expectations for mortgage and broker/dealer fundamentals to improve in 2025. The analyst highlighted Hilltop Holdings' strong capital levels, pointing out a Common Equity Tier 1 (CET1) ratio of 19.5%, indicating that potential capital deployment could significantly enhance earnings, a factor not currently reflected in their forecast.
The new price target of $34.00 is based on 22 times the firm's 2025 EPS forecast and 1.12 times its 12-month trailing book value per share (TBVPS) forecast.
Hilltop, during its 2024 Annual Meeting of Stockholders, concluded the election of 16 director nominees, including Rhodes R. Bobbitt and Tracy A. Bolt, all of whom will serve on the company's Board of Directors until the 2025 annual meeting. W. Robert Nichols, III was among the elected directors, despite having the highest number of withheld votes.
In addition to the director elections, the company's stockholders approved the 2023 compensation for its named executive officers in a non-binding advisory vote. This vote, often referred to as "say on pay," is an indication of shareholder sentiment towards the company's executive pay practices.
InvestingPro Insights
As Hilltop Holdings (NYSE:HTH) navigates the financial landscape, recent data from InvestingPro shows a company with a solid track record and challenging valuations. With a market capitalization of $2.12 billion and a P/E ratio of 18.68, Hilltop Holdings stands as a notable player in its sector. The adjusted P/E ratio for the last twelve months as of Q2 2024 slightly lowers at 18.46, reflecting a stable valuation over time.
An InvestingPro Tip highlights that Hilltop Holdings has raised its dividend for 8 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the company's dividend yield of 2.09% and a dividend growth of 6.25% over the last twelve months as of Q2 2024. On the flip side, the company is trading at a high P/E ratio relative to near-term earnings growth, which might be a red flag for value-focused investors.
For those considering an investment in Hilltop Holdings, it's worth noting that analysts predict the company will be profitable this year, and it has been profitable over the last twelve months. This aligns with the company's solid operating income margin of 13.58% over the same period. Interested investors can find more detailed analysis and additional InvestingPro Tips for Hilltop Holdings at https://www.investing.com/pro/HTH. To enhance your investing strategy, use coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With 6 additional tips available on InvestingPro, investors can gain deeper insights into Hilltop Holdings' financial health and prospects.
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