Shares of mid-western regional bank Huntington Bancshares Inc. (HBAN, Financial) pulled back more than 4% on Friday following the release of its most recent quarterly results.
The Colombus, Ohio-based commercial banking institution announced its fiscal Q4 and full-year 2020 earnings results before markets opened on Friday, missing analyst estimates.
Huntington has now lost nearly 8% in market value over the last seven days, but is still up more than 97% since bottoming on March 23 last year. At the current price of about $13.84, the company's stock is now valued at a trailing price-earnings ratio of about 19.56, which is higher than the Peter Lynch fair value.
Highlights from recent quarterly results
In the company's most recent quarterly results, Huntington's earnings per share for Q4 fell by 3.57% year-over-year to $0.27, which was lower than the consensus Street estimate of $0.29. The company's quarterly revenue rose 7.12% to $1.23 billion, which again came short of the average analyst expectation of $1.25 billion.
Huntington's full-year earnings per share fell to $0.69, down from $1.27 reported in 2019. Revenue for the year rose marginally by 3% to $4.84 billion, up from $4.69 billion.
The company's revenue has maintained consistent growth over the last five years while net income fell for the first time since 2014. This massive decline in net income was attributed to the substantial cuts to interest rates.
However, Huntington Chairman, President and CEO Steve Steinour said that the company's good 2020 performance was driven by a "record year of mortgage originations and continued strong auto, RV, and marine loan originations, as well as the $6 billion of PPP loans, helped drive our 2020 results." He said that the economic outlook is promising with customers expressing optimism going into 2021.
Valuation
From a valuation perspective, shares of Huntington are trading at a trailing 12-month price-earnings ratio of 19.56, which is relatively higher than the average of its peers. Fellow mid-west regional bank Fifth Third Bancorp (FITB, Financial) trades at a trailing 12-month price-earnings ratio of 16.89, while Lakeland Financial Corp (LKFN, Financial) and Bank First Corp (BFC, Financial) trade at 18.80 and 13.81, respectively.
However, when we factor in expected earnings from Morningstar analysts for the next 12 months, Huntington appears to be significantly undervalued with a forward price-earnings ratio of 9.79 when compared to Fifth Third Bancorp's equivalent of 10.62. On the other hand, Lakeland and Bank First trade at forward price-earnings ratios of 19.92 and 15.05, respectively.
In summary, shares of Huntington appear to be relatively overvalued based on the trailing 12-month earnings. However, when we look further forward, the company's stock appears to be competitively valued. The latest pullback makes it an interesting prospect in 2021, in my opinion.
Disclosure: No positions in the stocks mentioned.
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