Iberiabank Corp.'s entry into Arkansas with two February acquisitions and its commitment to rebuilding New Orleans should help the Louisiana company reach its 2007 earnings goals, an analyst says.
Gary P. Tenner of SunTrust Robinson Humphrey said a string of one-time items last year created "mixed sentiment" on Wall Street about the $4.4 billion-asset Iberia. He said he expects more one-time items this quarter but that he also expects Iberia's financial reporting to clear up later this year.
"I think the expectations are for a positive earnings ramp through the year and a little bit less noise," said Mr. Tenner, whose firm has done investment banking work for Iberia in the last 12 months.
Mr. Tenner spoke in an interview Tuesday shortly after he raised his "neutral" rating on Iberia's shares to "buy." In a research note, he wrote that he upgraded the stock primarily because of its declining performance in 2007. The shares are down 9.5% since the beginning of the year and 17.5% from their 52-week high reached in October.
John R. Davis, a senior vice president with Iberia, would not discuss its financial performance, because it is nearing the end of its quarter. However, he said in an interview Tuesday that many of the one-time items the company has reported since Hurricane Katrina hit in August 2005 have resulted from business decisions dictated by that event.
For instance, Iberia increased its loan-loss reserves in early 2006 and recorded one-time expenses last year as it started building 12 branches in New Orleans and other communities to which New Orleanians fled.
"We're always focused on long-term performance, and sometimes long-term performance requires making investments that have a near-term cost," Mr. Davis said. "We have been very aggressive investors for the long-term future with things like strategic hires, the branch expansion initiative, and the acquisitions."
However, Mr. Tenner said it has taken longer than expected for Iberia to generate returns from its post-hurricane branch-building effort.
"Expenses should have been front-loaded, but 15 months out, they're not quite through the entire project," he said.
The Arkansas acquisitions should give Iberia's 2007 earnings a lift, however, Mr. Tenner said.
Iberia bought the $502 million-asset Pulaski Investment Corp. of Little Rock, with 11 branches, 22 mortgage offices, and a credit card portfolio, on Feb. 1, spending $130 million. The next day it closed its $79 million deal for Pocahontas Bancorp Inc. in Jonesboro. Pocahontas had $733 million of assets and 21 branches.
Iberia expects to convert Pulaski by the end of March and Pocahontas by the end of April.
In his research note Tuesday, Mr. Tenner said he expects Iberia to report 2007 net income toward the low end of its previous guidance of $4 to $4.15 a share. (It reported net income of $3.61 a share in 2006, in line with analyst expectations, according to Thomson Financial.) On Tuesday, Iberia's shares fell 0.2% in a declining market.
