Cost savings from Texas acquisitions come into focus

Huntington Bancshares (HBAN) is drawing investor attention after detailing progress on its Texas bank acquisitions, including US$70 million in cost savings from Veritex and a plan to reach US$500 million in total cost and revenue synergies by 2026.

At a share price of US$16.82, Huntington’s recent Texas updates arrive after a 7.54% 90 day share price return and a year to date decline of 3.78%, while the 3 year total shareholder return of 70.97% points to stronger longer term momentum.

If this kind of regional banking story has your attention, it can be helpful to widen the lens and check out 20 top founder-led companies

With Huntington’s stock around US$16.82, solid reported revenue and net income, and management outlining ambitious synergy and profitability targets, the key question is whether investors are still underestimating the story or have already priced in future growth.

Most Popular Narrative: 15.2% Undervalued

With Huntington Bancshares trading at US$16.82 against a narrative fair value of about US$19.84, the gap centers on how investors view the Texas and Southeast expansion versus the bank's earnings potential under a 7.35% discount rate.

The expansion into Texas via the Veritex acquisition, combined with ongoing organic growth in high-population-growth markets (Texas, North Carolina, South Carolina), is expected to substantially increase Huntington's addressable market and fee-generating opportunities. This is anticipated to support higher revenue and earnings growth as these regions develop.

Want to see what is baked into that valuation gap? The narrative relies on faster revenue growth, stronger margins, and a higher future earnings multiple. Curious which assumptions really move the fair value line?

Result: Fair Value of $19.84 (UNDERVALUED)

However, the narrative can shift quickly if the integration of the Texas deals runs into cost or culture issues, or if digital competitors pressure growth and profitability.

Another way to look at the valuation

The narrative fair value points to Huntington Bancshares being 15.2% undervalued at US$16.82, but the P/E ratio tells a different story. At 16.5x earnings, the stock trades above the US Banks industry on 11.7x, above peers on 12.8x, and even above its own 15.4x fair ratio.

In plain terms, the market is already paying a richer earnings multiple than both the sector and the fair ratio suggest. This can mean there may be less room for error if the Texas and Southeast expansion or earnings path fall short. Which valuation lens do you think should carry more weight here: the earnings multiple, or the narrative fair value?

Next Steps

Plenty of moving parts here, so how does it all sit with your own risk and reward tolerance, and are you comfortable with the current pricing or not? To pressure test that view against the key concerns and potential upsides other investors are watching, take a closer look at the 4 key rewards and 1 important warning sign

Looking for more investment ideas?

If you are weighing what to do next after reviewing Huntington, it makes sense to line up a few other candidates and see how they compare.

• Scan for quality at a discount by checking out the 46 high quality undervalued stocks and see which stocks currently sit on your kind of watchlist.
• Strengthen the income side of your portfolio by reviewing the 9 dividend fortresses before the next round of payouts is announced.
• Dial back potential volatility by focusing on the 63 resilient stocks with low risk scores so you are not caught off guard when conditions change.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.