HBT Financial's Earnings Crossroads: Can a Positive ESP Overcome a Bearish Zacks Rank?

As HBT Financial (HBT) prepares to report Q2 2025 earnings on July 21, investors face a paradox: a +1.67% Earnings ESP—a positive signal for a potential beat—clashes with a Zacks Rank #4 (Sell), which historically weakens predictive confidence. This article dissects the reliability of these metrics, analyzes HBT's track record of outperforming estimates, and weighs the risks and opportunities for investors ahead of the release.

The ESP vs. Zacks Rank Dilemma

The Zacks Earnings ESP model estimates the likelihood of an earnings surprise by comparing the “Most Accurate Estimate” (a proprietary blend of analyst revisions) to the consensus. A +1.67% ESP suggests analysts have grown more bullish on HBT's Q2 results, possibly due to improving revenue trends or cost efficiencies. However, the #4 Zacks Rank complicates this narrative.

The Zacks Rank evaluates near-term momentum based on earnings estimate revisions. A #4 rank indicates mixed or negative revisions, signaling the stock may underperform the market. While HBT has beaten EPS estimates in four consecutive quarters (including a +7.02% surprise in Q1 2025), the lack of upward revisions ahead of Q2 has dampened broader sentiment. This creates a critical question: Can HBT's historical reliability override the Zacks system's current skepticism?

Historical Performance vs. Current Mixed Signals

HBT's 4-for-4 EPS beat streak since late 2024 is a strong tailwind. In Q1 2025, it reported $0.61 EPS against a $0.57 estimate, driven by higher net interest margins and efficient cost management. Analysts now expect $0.60 EPS for Q2, a 5.3% YoY increase, with revenues projected at $58.85 million (+3.9% YoY). The ESP's +1.67% boost hints at upside risks to these estimates, perhaps from loan growth or deposit cost management.

Historical data supports this optimism in the short term: in past instances when HBT beat earnings expectations between 2022 and now, the stock saw a 72.73% win rate over 3 days, though this dropped to 36.36% at 10 days and 18.18% after 30 days. The maximum return during this period was 1.49% on the 11th day following the beat, underscoring the fleeting nature of post-earnings momentum.

Yet the Zacks Rank #4 reflects broader skepticism. While the Banks – Northeast industry ranks in the top 36% of Zacks industries, HBT's lack of upward revisions suggests analysts are cautious about sustaining momentum. This could stem from macro risks like rising interest rates or credit quality concerns, which may weigh on profitability.

Valuation and Dividend Appeal

HBT's trailing P/E of 10.35 remains below the industry average of 12.6, offering a potential valuation discount. Meanwhile, its 2.77% dividend yield (based on a $0.21 quarterly payout) provides income appeal, especially if the stock stabilizes post-earnings.

However, analysts' average price target of $25.80 (vs. current ~$29.50) suggests modest near-term expectations. Institutional buying—such as Picton Mahoney Asset Management's 47.7% stake increase—adds a bullish undertone, but the stock's 52-week high of $30.28 may limit upside unless earnings exceed expectations meaningfully.

Key Risks and Catalysts

• Upside Catalysts:
• A revenue beat (if actuals exceed $58.85M) could alleviate concerns about top-line growth.
• Positive commentary on loan growth or deposit stability in the earnings call.

• A post-earnings upgrade to Zacks Rank #3 or higher, reversing the current “Hold” signal.

• Downside Risks:

• A revenue miss or margin compression due to rising funding costs.
• Downward revisions to 2025 EPS guidance, which is currently forecast at $2.27—a 7.7% decline from 2024's $2.46 EPS.

Investment Recommendation

Cautious Buy with a Tight Stop-Loss
While HBT's positive ESP and historical reliability support a bullish bias, the Zacks Rank #4 and muted analyst targets require caution. Investors should consider:
1. Buying on dips below $28, with a stop-loss at $26.
2. Trusting the ESP but hedging: Pair a long position with a put option to protect against a post-earnings sell-off.
3. Prioritizing management's commentary: The earnings call's discussion of 2026 growth plans, credit quality, and capital allocation will be critical to re-rating the stock.

Conclusion

HBT Financial's Q2 earnings are a pivotal test of its ability to sustain its beat streak in a challenging macro environment. While the +1.67% ESP offers hope for a positive surprise, the Zacks Rank #4 and tepid forward guidance temper optimism. Investors should remain cautiously optimistic, focusing on valuation support and management's roadmap for growth. A robust earnings report could reset expectations and justify a Zacks Rank upgrade, but patience—and a focus on risk management—is key.

Final Takeaway: HBT's story hinges on execution. If earnings exceed expectations, the stock could rally toward $32–$34. If not, the #4 Zacks Rank's caution may dominate, pushing shares lower. Stay alert to the call's details and adjust positions accordingly.