Wintrust Analysts Optimistic Despite Consistently Low Stock Price

By Katie Murar

Analysts maintain a positive outlook for Illinois bank holding company Wintrust Financial Corp. despite its lower-than-expected fourth-quarter earnings released last month and consistently low stock price.

“Loans were up almost 5 percent which is better than expected, and credit quality was also good,” John Rodis, senior vice president and research analyst for Fig Partners LLC, said. “As far as their future, they’re going to be fine. You will continue to see them grow in Chicago and take market share and you’ll continue to see them do some smaller, one-off acquisitions.”

Despite high operating expenses driving a lower-than-expected margin, Wintrust will overcome challenges in 2016 due to its strong loan growth and solid credit quality, Rodis said.

Wintrust Stock Price, 2014-2016

Lower-than-expected fourth-quarter earnings caused Wintrust shares to drop in 2016. (Katie Murar/MEDILL)
Lower-than-expected fourth-quarter earnings caused Wintrust shares to drop in 2016. (Katie Murar/MEDILL)

On Feb. 18, Wintrust shares closed at $40.61. Its 52-week high was $55.79 and its low was $37.96.

Analysts set the 12-month target price at $48.44, and the consensus of 2016 earnings per share is $3.67, compared with $3.10 last year. Thirty-three percent of analysts rate WTFC stock as “buy”, and 66 percent rate it as “hold.”

Terry McEvoy, a senior analyst at Stephens Inc., said Wintrust will face challenges in 2016 related to the impetus for the stock drop, including expenses and growing revenue.

“We have been seeing a decline in the manufacturing sector of Chicago for two months which can have an implication on their ability to grow commercial loans, or can trigger some weakness within their existing borrowers, which we’re continuing to watch closely,” McEvoy said.

McEvoy also noted Wintrust’s two-pronged growth strategy, which includes mergers and acquisitions as well as organic growth, as a unique approach that has proven successful in the past.

“Wintrust has a proven track record of not only finding acquisition opportunities, but integrating those banks and then achieving the necessary cost saves,” McEvoy said.

“On the organic growth side, they put up almost $800 million of loan growth in the fourth quarter, and I think that the number will continue to be close to 300 per quarter. They will expand market share and commercial real estate within the Midwest, as well as growing their life insurance which is unique for Wintrust, but has been a nice area for growth.”

Wintrust Financial got its start as a community bank in suburban Rosemont, Ill., before expanding in the Chicago metropolitan area and to southeastern Wisconsin. Wintrust now offers personal and commercial banking services for customers through 15 banking subsidiaries.

McEvoy did not lower his price target of $56.00 for 2016, which he calls “conservative” to begin with, and said he sees a positive future for the company despite its year-long drooping stock price and higher expenses.

“Relative to the banking industry, they have a positive year ahead,” McEvoy said. “I think they have demonstrated their ability to manage the company through different financial cycles, and I’d like to think they are positioned for continued out-performance through ups and downs of the economic cycle.”

Stephens Inc. gives Wintrust Financial’s shares an “overweight” rating, meaning the stock’s total return is expected to be greater than the total return of the company’s banking sector over the next 12 months.

In a statement by Raymond James following the earnings release, analysts reduced their target price from $59 to $52, but reiterated a “strong buy” rating on the stock.

“While we are reducing our EPS estimates, the 5% decline in its share price on Tuesday was overdone, in our view, and our thesis remains intact,” the statement said. “We believe Wintrust’s strong growth profile and operating leverage will drive above-peer EPS growth. As a result, we believe its shares deserve a premium valuation.”

Analysts for Raymond James also asserted their confidence in Wintrust’s ability to navigate troublesome economic times, thus allowing for “multiple premium finance portfolio acquisitions.”

“Going forward, we expect the bank to continue to gain market share and outgrow most of its peers,” the statement said. “We expect Wintrust to produce substantial positive operating leverage, driving better-than-peer EPS growth.”

Photo at top: Despite a consistently low share price, analysts say Illinois bank holding company Wintrust Financial Corp. will beat out competitors in 2016. (Katie Murar/MEDILL)