Trade of the Day: HBAN Stock in the Midst of a Powerful Recovery?

Huntington Bancshares Incorporated (HBAN) — This Ohio-based regional bank holding company has over 700 branches in Ohio, Pennsylvania, Indiana, West Virginia, Kentucky and Florida.

In late January, Huntington said it would buy Firstmerit Corp (FMER), another Ohio-based bank, in a cash-and-stock deal valued at over $3 billion.

Following the merger announcement, S&P Capital IQ Equity Research reiterated its “Strong Buy” rating on HBAN stock and its 12-month target of $11.

Its analysts note that Ohio is a strong-growing economy, and also that Huntington recently strengthened its capital position. With interest rates expected to remain low, they anticipate net revenue growth of 5.3%, down from 6.2% last year, but still above the peer average.

Capital IQ estimates earnings will increase 10% in 2016 to 89 cents per share and another 9% to 97 cents per share in 2017.

HBAN stock has been the subject of buying by insiders and large investors recently. On March 2, CEO Stephen D. Steinour bought 10,000 shares at an average cost of $9.27 per share. And Neuberger Berman Group LLC increased its position in HBAN stock by 73,666 shares during the fourth quarter, according to recent SEC filings.

Turning to the chart, HBAN stock fell from a double-top near $12 in December to below $8 in late January. It double-bottomed in mid-February, but then bounced and closed a crucial gap down.

On March 1, HBAN stock broke above the resistance line of a bullish channel, and then through its 50-day moving average at about $9.50.

HBAN stock appears to be in a powerful recovery, so my target is $11 or more. Traders who purchase shares at $9.50 could see capital gains of more than 15%, plus dividends. The company pays an annual dividend of 28 cents per share for a current forward yield of 2.9%.

HBAN Stock Chart
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Disclosure: Sam Collins owns shares of HBAN stock.

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