Heartland Financial USA Inc.‘s (HTLF) strong first-quarter performance, which included a 129% earnings surprise, helped shares reach a new 52-week high on June 12, 2012. The stock for this regional bank has gained 29% since the beginning of the year.

The company became a Zacks #1 Rank (Strong Buy) stock on April 25 based on its strong credit quality, steady capital position and remarkable earnings performance.

First Quarter EPS Ascends

On April 23, Heartland Financial reported first quarter 2012 earnings of 71 cents per share, compared with the Zacks Consensus Estimate of 31 cents. The result was also nearly four times last year’s 18 cents. An improved net interest margin and a reduced provision for credit losses led to the solid year-over-year growth. However, higher non-interest expenses were on the downside.

Net interest income was $38.2 million, up 7% from the year-ago quarter on the back of a 6% jump in average earning assets. Non-interest income climbed 86% to $23.4 million. Non-interest expense grew 22% to $40.1 million. Provision for credit losses declined 76% from the year-ago quarter to $2.4 million.

Earnings Estimates on the Move

The Zacks Consensus Estimate for 2012 has jumped 41.3% to $2.02 over the past 60 days, while the guidance for 2013 increased 10.8% to $1.84. The 2012 estimate implies a year-over-year growth of 64.2%.

Valuation Not So Cheap

Heartland Financial currently trades at a forward P/E of 10.0x, a 13% discount to the peer group average of 11.5x. However, on a price-to-book basis, shares currently trade at 1.2x, a 20% premium to the peer group average of 1.0x.

Moreover, Heartland Financial has a trailing 12-month return on equity (ROE) of 13.4%, well above the 8.8% of its peers. This implies that the company reinvests its earnings more efficiently than its peer group.

HTLF Continues to Show Strength

Heartland Financial has been generating strong momentum since June 1, with the expectation of improved second-quarter earnings. Moreover, the company has almost continuously outperformed its 200-day moving average over the last six months. The year-to-date return for the stock came in at 31.9% compared with the S&P 500’s return of 5.3%.


Headquartered in Dubuque, Iowa, Heartland Financial provides various banking products and services. The company focuses primarily on clients in the Midwestern, Southwestern and Western United States, to whom it delivers high-quality financial products and services. The company was founded in 1981 and conducts business through sixty-one full-service banking locations as of May 4, 2012. With a market capital of about $325.6 million, Heartland Financial competes with First Merchants Corp. (FRME) and Firstbank Corporation (FBMI).

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