Huntington Bancshares (HBAN): A Resilient Income Play Amid Earnings Uncertainty

Huntington Bancshares Incorporated (HBAN), a regional banking powerhouse serving the Midwest and Mid-Atlantic regions, finds itself at a crossroads as Q2 2025 earnings loom. While its neutral Zacks Rank #3 (now revised to #5, signaling a "Strong Sell" due to recent earnings estimate cuts) has spooked some investors, HBAN's history of earnings surprises, robust dividend yield, and fortress balance sheet suggest it remains a compelling income-focused play. Let's dissect whether the stock's near-term headwinds are overblown or a legitimate cause for caution.

Earnings Outlook: Navigating Mixed Signals

The consensus Q2 2025 EPS estimate of $0.30 reflects a 6.7% sequential decline from Q1's $0.34, driven by analyst pessimism. Over the past 30 days, the consensus has been trimmed by 4.1%, with the Zacks Earnings ESP now negative at -1.22%, signaling downward revisions. Yet, Huntington has a proven track record of beating expectations. For instance, it surpassed Q2 2024 estimates by 7.14% despite a $0.30 EPS result.

Looking ahead, full-year 2025 EPS is still projected to grow 16.1% to $1.44, with further expansion to $1.58 in 2026. This long-term optimism hinges on loan growth, deposit stability, and margin resilience. Management's Q2 commentary will be critical—investors should monitor its outlook on net interest margins, which face pressure from potential Fed rate cuts, and credit quality trends.

Dividend Stability: A Pillar of Resilience

HBAN's dividend yield of 3.55% is a standout feature in an environment where regional banks have slashed payouts. The annual dividend of $0.62 is well-supported by a moderate 53.92% payout ratio, leaving ample room for reinvestment. While dividend growth has been muted—1.34% annualized over five years—this reflects a prudent approach rather than weakness.

Crucially, HBAN's dividend has been consistently paid without cuts for years, with a 1-year streak of increases. The most recent quarterly dividend of $0.155 per share (annualized to $0.62) aligns with a payout ratio of 47.33%, comfortably below the 60% sustainability threshold.

The company's $1 billion buyback authorized in April .

Valuation and Balance Sheet Strength

HBAN's valuation remains compelling. Trading at 0.97x P/B and 9.8x P/E—below regional bank medians—it offers a margin of safety. Its fortress balance sheet, with $142 billion in deposits and strong loan-to-deposit ratios, provides a buffer against economic uncertainty. Analysts highlight robust credit metrics, including a 0.27% nonperforming loan ratio, which is among the lowest in its peer group.

The Discrepancy: Why the Bulls Still Have a Case

The Zacks #5 ranking and negative EPS signals contrast with HBAN's structural strengths. While short-term estimates may be shaky, its dividend yield, valuation, and deposit growth (up 4.1% YTD) suggest it's undervalued. The stock's 12-month average target of $18.50 (vs. recent $16.20) reflects optimism about its re-rating potential.

Investment Thesis

HBAN is a buy for income-focused investors willing to overlook near-term volatility. Key catalysts include:
- A Q2 earnings beat or stable guidance that reverses analyst pessimism.
- Valuation re-rating as peers stabilize post-Fed rate cuts.
- Dividend sustainability amid a yield-starved market.

Risk Factors: Sensitive to Fed policy, loan demand slowdowns, and margin compression.

Final Take

While HBAN's Zacks Rank #5 and earnings revisions warrant caution, its dividend resilience, fortress balance sheet, and undervalued metrics make it a compelling hold for income portfolios. Investors should consider dollar-cost averaging into dips below $16.50, with a focus on management's commentary on loan growth and margin stability during Q2 earnings. For those prioritizing yield and stability, HBAN remains a regional banking stalwart worth owning.