Baird has made an adjustment to First Horizon National's (NYSE: NYSE:FHN) financial outlook, raising the price target from $16.00 to $17.00 while maintaining a Neutral rating on the stock.
The firm's analyst cited several reasons for the updated price target, noting First Horizon's third-quarter performance exceeded expectations.
First Horizon reported its third-quarter earnings per share (EPS) at $0.40, which surpassed the anticipated figures due to stronger fee income, particularly from fixed income, and better-than-expected credit performance.
The company's net charge-offs (NCOs) were approximately 0.15%, significantly lower than the consensus estimate of around 0.28%.
The analyst pointed out that most of the reserve build during the quarter was qualitatively associated with recent weather events. Despite these challenges, First Horizon demonstrated solid execution, with a trend of sequential return expansion and strategic buybacks.
The revenue outlook for First Horizon remains unchanged, but the analyst suggests that it may lean more towards fee income as growth in countercyclical businesses compensates for the ongoing pressure on deposits. In light of the stock trading near post-TD highs, the analyst recommends patience to investors monitoring First Horizon's performance.
In other recent news, First Horizon Corporation reported a strong third quarter with adjusted earnings per share (EPS) of $0.42, a $0.06 increase from the previous quarter, and a pre-provision net revenue rise of $11 million.
The company's robust performance led RBC Capital Markets, Stephens, and Citi to raise their price targets to $20, maintaining their positive ratings on the stock.
Analysts from these firms highlighted First Horizon's ability to offset pressures on net interest income and margin with strong fee income and fixed-income trading activities. They also noted the company's effective control over core expenses and favorable credit metrics. Looking ahead, the company anticipates ongoing margin challenges but expects a modest positive trend in revenue projections, buoyed by fee-based income momentum.
First Horizon's management is also preparing for the company to cross the $100 billion asset threshold while maintaining an 11% Common equity Tier 1 (CET1) ratio, a key measure of financial strength. Despite robust deposit growth driven by nearly $1 billion in client acquisition, the bank acknowledges that loan growth remains muted due to market factors.
InvestingPro Insights
Recent data from InvestingPro adds depth to Baird's analysis of First Horizon National (NYSE:FHN). The company's market cap stands at $9.25 billion, with a P/E ratio of 12.13, indicating a relatively modest valuation compared to some peers. This aligns with Baird's Neutral rating and suggests potential for growth.
InvestingPro Tips highlight that FHN has maintained dividend payments for 14 consecutive years, demonstrating financial stability and commitment to shareholder returns. This is particularly relevant given the recent strong performance noted in Baird's report. Additionally, FHN is trading near its 52-week high, with a significant 66.68% price total return over the past year, reflecting the market's positive response to the company's recent performance.
The company's operating income margin of 37.3% for the last twelve months ending Q3 2024 indicates strong profitability, supporting Baird's observation of solid execution and return expansion. However, an InvestingPro Tip cautions that FHN suffers from weak gross profit margins, which investors should consider alongside the positive earnings report.
For readers seeking a more comprehensive analysis, InvestingPro offers 5 additional tips and a range of financial metrics to further evaluate First Horizon National's investment potential.
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