Rising interest rates are good news for these 2 “strong buy” stocks
Since Federal Reserve Chairman Jerome Powell spoke at the Jackson Hole symposium last month, markets have fallen — and largely in response to his comments. The central bank chief made it clear in his comments that he would continue to raise interest rates in a bid to tackle inflation, which currently stands at 8.5% a year. It looks like investors are pricing in this position, and the Fed is expected to institute another 0.75% rate hike later this month.
But while markets are generally hurting, investors can still find individual stocks that stand to benefit from the current environment of rising interest rates — and equity professionals on Wall Street are already picking those potential winners.
Using TipRanks’ database, we have identified two such stocks. These are Strong Buy tickers, according to the analyst community, and both offer double-digit upside potential. Let’s find out what, at home, caught the attention of analysts.
Hancock Whitney Corporation (HWC)
We’ll start with a bank holding company, Hancock Whitney. This company operates bank branches in the Gulf Coast region, with more than 230 locations in the states of Florida, Alabama, Mississippi, Louisiana, and Texas, and is headquartered in Gulfport, Mississippi. The bank offers the usual full range of retail, small business and commercial services, including savings and checking accounts, mortgages, business loans, personal credit, online and mobile banking, pension advice, insurance and wealth management. In an interesting note, the company is the official bank for the New Orleans Saints professional football team.
In its latest quarterly statement, for 2Q22, total revenue reached $331.4 million, in line with Street’s expectations. Net income before provision – the sum of net interest income and non-interest income less expenses (without provisions for losses) – increased by $12.4 million, or 9%, from a year on the other, to reach $146.9 million. The company’s revenue of $121.4 million was down slightly (1.7%) from the $123.5 million recorded in 2Q21. Diluted EPS was $1.38, compared to $1.40 in the prior year quarter. At the same time that earnings were slightly lower year-over-year, they also slightly beat the EPS forecast of $1.35.
Like many banking companies, Hancock pays a modest dividend. The company’s current payout, declared in July for payment this month, was 27 cents per common share. At this rate, the dividend is annualized at $1.08 and yields 2.3% slightly above the average. The key point here is reliability – Hancock Whitney has paid a dividend every fiscal quarter since 1967.
By covering this stock for DA Davidson, analyst Kevin Fitzsimmons underscores how Hancock Whitney is likely to gain as rates rise: “HWC remains an asset-sensitive beneficiary of higher rates and an ability to delay deposit pricing, and we see the bank as well positioned for a Additional NIM (net interest margin) expansion in 2H22… We have a feeling that the NIM in 2H22 will increasingly benefit from higher rates, while the remaining excess liquidity will likely be used up by YE22. While HWC remains quite asset sensitive, we suspect the bank is considering adding cash flow hedges to create a more neutral stance.
To that end, Fitzsimmons gives HWC shares a Buy rating and its price target, at $60, implies a one-year upside potential of about 29%. (To view Fitzsimmons’ track record, Click here)
Overall, this bank holding company has garnered 4 recent reviews from Wall Street analysts, and all agree this is a stock to buy, which is unanimous in the consensus rating StrongBuy. The shares are priced at $46.59 and their average price target of $58.25 suggests a 25% upside over the next 12 months. (See HWC stock forecast on TipRanks)
From banking, we’ll adjust slightly – to fintech, and look at Payoneer. This company has been active in the field of online international money transfers and digital payment services since 2005, and now offers services in more than 35 languages through 24 global offices to more than 5 million customers worldwide. Payoneer went public through a SPAC transaction in June last year.
In its latest quarterly report, ranking fifth as a public company, for 2Q22, Payoneer reported total revenue of $148.2 million, a year-over-year gain of 34%. Payoneer’s net profit fell sequentially in the second quarter, from $20.2 million in the first quarter to $4.4 million in the current report. On a per share basis, that meant a drop from 6 cents EPS to 1 cent EPS. At the same time, the figure exceeded Street’s expectations for EPS of -$0.06. The company reported two profitable quarters in a row, as opposed to net losses in the previous three quarters. Additionally, the company has more than $5 billion in customer funds on deposit and $492 million in cash.
Commenting on the impact of rising rates on Payoneer, Northland’s 5-star analyst Michel Grondahl states, “Payoneer customers have maintained balances of over $5.1 billion on the Payoneer platform and as interest rates rise, this may lead to increased interest income.”
Getting down to business, Grondahl goes on to say, “Payoneer had a strong 2Q with new customer acquisitions, great partnerships, a new repayment period for customers under 12 months and increased adoption of higher value services. added, 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. »
Unsurprisingly, Grondahl assesses that Payoneer shares an outperformance (i.e. buy) and its price target of $10 indicates approximately 59% upside potential this coming year. (To see Grondahl’s track record, Click here)
Overall, the five most recent analyst reviews of this stock are positive, earning PAYO its coveted Strong Buy consensus rating. The shares have an average price target of $9.13 and a trading price of $6.29, suggesting around 45% upside over the next 12 months. (View PAYO Stock Predictions on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.