Since Federal Reserve Chairman Jerome Powell spoke at the Jackson Hole Symposium last month, markets have tumbled — and largely in response to his comments. The head of the central bank made it clear in his comments that he will continue to raise interest rates in an attempt to fight inflation, which is currently 8.5% a year. Investors appear to be pricing in this position and expectations are that the Fed will introduce another rate hike of 0.75% later this month.
But while markets are generally in pain, investors can still find individual stocks that are poised to potentially benefit from today’s rising interest rate environment — and Wall Street’s stock pros are already picking those potential winners.
Using TipRanks’ database, we found two such shares. According to the analyst community, these are Strong Buy tickers and both offer double-digit upside potential. Let’s find out exactly what about them has attracted the attention of analysts.
Hancock Whitney Corporation (HWC)
We’ll start with the Hancock Whitney bank holding company. This firm operates bank branches in the Gulf Coast region, with more than 230 locations in the states of Florida, Alabama, Mississippi, Louisiana and Texas, and its headquarters in Gulfport, Mississippi. The bank offers the usual full range of retail, small business and commercial services, including savings and current accounts, mortgages, business loans, personal loans, online and mobile banking, retirement advice, insurance and wealth management. On an interesting side note, the firm is the official bank of the New Orleans Saints professional football team.
In its latest quarterly report for 2Q22, total revenue came in at $331.4 million, in line with Street expectations. Net income before provisions – the sum of net interest income and non-interest income less expenses (provisions for losses) – rose $12.4 million, or 9%, from the prior year to $146.9 million. The company’s revenue of $121.4 million was down slightly (1.7%) from the $123.5 million reported in 2Q21. Diluted EPS was reported as $1.38, compared to $1.40 in the year-ago quarter. At the same time that earnings are slightly down year-over-year, they also just topped the EPS estimate of $1.35.
Like many banking firms, Hancock pays a modest dividend. The company’s current payment, announced in July for payment this month, was for 27 cents per common share. At this rate, the dividend grows annually to $1.08 and yields a slightly above average yield of 2.3%. The key point here is reliability — Hancock Whitney has paid a dividend every fiscal quarter since 1967.
In covering these shares for DA Davidson, an analyst Kevin Fitzsimmons points out how Hancock Whitney stands to gain from rising rates: “HWC remains an asset-sensitive beneficiary of higher interest rates and the ability to lag deposit pricing and we believe the bank is well positioned for additional NIM (net interest margin) expansion in 2H22… We feel that 2H22 NIM will increasingly benefit from higher rates, while remaining excess liquidity is likely to be used by YE22. While HWC remains quite asset sensitive, we sense the bank is looking to add cash flow hedges to create a more neutral position.”
To that end, Fitzsimmons gives HWC stock a Buy rating and its $60 price target suggests a one-year upside potential of ~29%. (To watch Fitzsimmons’ record, Press here)
Overall, this bank holding company received 4 recent Wall Street analyst reviews, and they all agree: it’s a Buy stock, making the consensus Strong Buy rating unanimous. Shares are priced at $46.59, and their average target price of $58.25 suggests upside of 25% over the next 12 months. (See the HWC stock forecast at TipRanks)
From banking we will adapt slightly – to fintech and look at Payoneer. This company has been in the business of online international money transfer and digital payment services since 2005 and now offers services in over 35 languages through 24 global offices to more than 5 million customers worldwide. Payoneer went public in a SPAC transaction last June.
In its latest quarterly report, its fifth as a public company, for 2Q22, Payoneer reported total revenue of $148.2 million, an annual gain of 34%. Payoneer’s net income fell sequentially in the second quarter, from $20.2 million in the first quarter to $4.4 million in the current report. Per share, that meant a decline of 6 cents EPS to 1 cent EPS. At the same time, the figure beat Street expectations for EPS of $-0.06. The company reported two consecutive profitable quarters, as opposed to net losses for the previous three quarters. In addition, the company has over $5 billion in customer funds on deposit and cash assets of $492 million.
Commenting on the impact of rising interest rates on Payoneer, Northland 5-star analyst Michael Grondal says: “Payoneer customers maintain $5.1 billion in balances on the Payoneer platform, and as interest rates rise, this could lead to higher interest income.”
Getting down to the nitty-gritty, Grondahl continued by saying, “Payoneer had a strong second quarter with new customer acquisitions, exciting partnerships, a new customer payback period of less than 12 months, and increased adoption of higher value services , including B2B AP/AR in many high-growth markets, including 50% year-over-year volume and revenue growth in Latin America, Southeast Asia, the Middle East and North Africa.”
Not surprisingly, Grondahl rates Payoneer stock an Outperform (i.e. Buy) and his $10 price target indicates ~59% upside potential over the next year. (To watch Grondahl’s record, Press here)
Overall, all five of the most recent analyst reviews for this stock are positive, giving PAYO the desired consensus rating of Strong Buy. The stock has an average price target of $9.13 and a trade price of $6.29, suggesting an upside of ~45% over the next 12 months. (Check out the PAYO stock forecast at TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.