Does Huntington Bancshares Support Higher Prices?

With shares of Hungtington Bancshares (NASDAQ:HBAN) trading around $7, is HBAN an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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T = Trends for a Stock’s Movement

Hungtington Bancshares provides commercial, small business, and consumer banking services. Like many small to large banks in the United States, this company took a significant amount of heat during and leading up to the Financial Crisis. Since then, the company has worked at rebuilding its image and has done so relatively well. As consumers and businesses are still skeptical on the big banks, Hungtington Bancshares stands to increase profits since consumers are opting for local options.

Head on over to the next page to explore the technical landscape of Hungtington Bancshares’s stock…

T = Technicals on the Stock Chart are Mixed

Huntington Bancshares saw a disastrous decline prior and during the Financial Crisis which translates into long-term bearish price action. The stock has yet to recover from all of the selling but has bounced back to 2008 prices on higher highs and higher lows. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Hungtington Bancshares is trading above its rising key averages which signal a strong uptrend in the near-term.

HBAN

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Hungtington Bancshares options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Hungtington Bancshares Options

31.54%

90%

86%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

April Options

Steep

Average

May Options

Steep

Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Hungtington Bancshares’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Hungtington Bancshares look like and more importantly, how did the markets like these numbers?

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2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

27.78%

15.79%

5.88%

17.65%

Revenue Growth (Y-O-Y)

7.99%

-0.63%

-0.88%

3.46%

Earnings Reaction

4.16%

-6.24%

-0.76%

0.79%

Hungtington Bancshares has seen increasing earnings growth in the last four quarters while revenue growth has increased in the latest quarter. From these figures, the markets are excited about Huntington Bancshares’s latest earnings announcement.

P = Excellent Relative Performance Versus Peers and Sector

How has Hungtington Bancshares stock done relative to its peers, Fifth Third Bancorp (NASDAQ:FITB), KeyCorp (NYSE:KEY), BB&T (NYSE:BBT), and sector?

Hungtington Bancshares

Fifth Third
Bancorp

KeyCorp

BB&T

Sector

Year-to-Date Return

12.86%

3.14%

13.27%

3.72%

9.48%

Hungtington Bancshares has been one of the relative performance leaders year-to-date.

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Conclusion

Hungtington Bancshares is well-positioned to take advantage of the consumer and business trend to flock to smaller banks after the big bank crisis. Earnings and revenue growth rates have recently impressed investors which has led the stock trend higher. Relative to its peers and sector, the company is one of the performance leaders. Look for Huntington Bancshares to OUTPERFORM.

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