Rising interest rates are good news for these 2 “Strong Markets” stocks

Since Federal Reserve Chairman Jerome Powell spoke at the Jackson Hole symposium last month, markets have slid — and largely in response to his comments. The central bank chief made it clear in his comments that he will continue to push interest rates in a bid to fight inflation, which is currently running at 8.5% a year. It appears that investors are pricing in this stance and expectations are that the Fed will make another rate hike of 0.75% later this month.

But while markets are generally feeling the pain, investors can still find individual stocks expected to potentially benefit from today’s rising interest rate environment — and Wall Street equity professionals are already picking those potential winners.

Using the TipRanks database, we identified two such stocks. These are strong market indicators, according to the analyst community, and both offer double-digit upside potential. Let’s find out what exactly has caught the attention of analysts.

Hancock Whitney Corporation (HWC)

We’ll start with a portfolio bank, Hancock Whitney. This company operates branch banks 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 current accounts, mortgages, business loans, personal credit, online and mobile banking, retirement advice, insurance and wealth management. On an interesting side note, the company is the official bank of the New Orleans Saints pro football team.

In its latest quarterly statement, for 2Q12, total revenue came in at $331.4 million, in line with Street expectations. Pre-provision net income – the sum of net interest income and non-interest income less expenses (excluding loss provisions) – rose $12.4 million, or 9%, year over year to 146.9 million dollars. The company’s revenue of $121.4 million was down slightly (1.7%) from the $123.5 million reported in 2Q11. Diluted EPS was recorded as $1.38, compared to $1.40 in the prior quarter. While earnings were slightly lower year-over-year, they also rose to higher-than-expected $1.35 EPS.

Like many banking companies, Hancock pays a modest dividend. The company’s current payout, announced in July for payment this month, was 27 cents per common share. At this rate, the dividend annualizes to $1.08 and yields a slightly above average 2.3%. The key point here is reliability – Hancock Whitney has paid a dividend every fiscal quarter since 1967.

Covering this stock for DA Davidson, analyst Kevin Fitzsimmons points out how Hancock Whitney stands to gain as interest rates rise: “HWC remains a sensitive beneficiary of higher interest rates and has the ability to lag deposit pricing, and we view the bank as well positioned for additional NIM (net interest margin) expansion in 2H12… We feel that 2H12 NIM will increasingly benefit from higher interest rates, while remaining excess liquidity will likely be used by the YE22. While HWC remains quite asset sensitive, we get the sense that the bank is looking at adding compensating cash flows to create a more neutral position.”

To that end, Fitzsimmons gives HWC stock a Buy rating, and his $60 price target implies a one-year upside potential of ~29%. (To follow Fitzsimmons’ history, Click here)

In total, this banking holding company has gathered 4 recent Wall Street analyst reviews, and they all agree: this is a buy stock, making it a unanimous Strong Buy rating. Shares are priced at $46.59 and the average target price of $58.25 suggests a 25% upside over the next 12 months. (See HWC Stock Prediction on TipRanks)

Payoneer (PAYO)

From the banking sector we will adjust slightly – to fintech and look at Payoneer. This company has been involved in online international money transfer 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 most recent quarterly report, it’s fifth as a public company, for 2Q12 Payoneer reported total revenue of $148.2 million, up 34% year over year. Net income for Payoneer fell sequentially in Q2, from $20.2 million in the first quarter to $4.4 million in the current report. Per share, that meant a drop from 6 cents EPS to 1 cent EPS. At the same time, the number beat Street expectations for EPS of -$0.06. The company posted two consecutive profitable quarters, as opposed to net losses in the three previous quarters. In addition, the company has well over $5 billion in customer funds on deposit and $492 million in cash.

Commenting on the impact of the rate hike on Payoneer, Northland 5 Star Analyst Michael Grondahl says, “Payoneer customers have maintained $5.1 billion+ in balances on the Payoneer platform, and as interest rates rise, this can lead to higher interest income.”

Grondahl goes on to say, “Payoneer had a strong Q2 with new customer acquisitions, good 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 the 50 % per year for volume and revenue growth in Latin America, Southeast Asia, the Middle East and North Africa.”

Not surprisingly, Grondahl rates Payoneer shares an Outperform (i.e. Buy), and the $10 price target suggests a potential ~59% upside over the next year. (To watch Grondahl’s record, Click here)

Overall, all five of the most recent analyst reviews for this stock are positive, giving PAYO the coveted strong buy consensus. Shares have an average target price of $9.13 and a trading price of $6.29, suggesting an upside of ~45% over the next 12 months. (See PAYO Stock Prediction on TipRanks)

To find good ideas for trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock information.

Disclaimer: The views expressed in this article are solely those of the selected 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.

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