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Here's Why First Horizon is a Must Add to Your Portfolio
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Improving operating backdrop, rising rate environment, anticipated tax benefit from the U.S. tax reform and the strengthening domestic economy are projected to continue supporting banking stocks. Keeping this in mind, we have selected First Horizon National Corporation (FHN - Free Report) for your portfolio.
With focus on positive operating leverage and sturdy balance-sheet growth across multiple areas, First Horizon appears a promising buying opportunity now. The company’s restructuring activities and expansion mode are anticipated to yield positive results for the stock.
Further, shares of this Zacks Rank #1 (Strong Buy) company have gained around 15.1% in six months’ time, outperforming 7% growth recorded by the industry.
First Horizon has a number of other aspects that make it an attractive investment option.
Why is First Horizon a Must Buy?
Benefit from Rate Hike: With a rise in rates, banks are likely to engage in more investment activities. This rate hike will also allow banks to lend at higher rates. As First Horizon currently derives around 60% of its revenues from net interest income, the company is set to benefit from the recent rate hikes.
Earnings Strength: First Horizon recorded earnings growth rate of 41.7% over the last three to five years. Retaining the earnings momentum, the earnings growth rate is anticipated to be around 18.1% for the current year and around 16% for 2018. Good news is that the company generated an average positive earnings surprise of around 0.6% over the trailing four quarters.
Prudent Expense Management: First Horizon’s cost-containment measures have supported bottom-line improvement for the past several quarters. Though non-interest expenses underlined a volatile trend in the past few years, the company remains committed toward expense management, through process improvement, branch network optimization and other efficiencies. Notably, the company recorded a negative three-year CAGR of 22% (2012-2014), it escalated year over year in 2015. However, it declined 12.2% in 2016 and 1.5% in the first nine months of 2017, highlighting First Horizon’s cost-control efforts.
Strategic Moves: First Horizon has executed several strategic repositioning efforts to improve its long-term profitability. Forming the fourth largest regional bank in the Southeast, in November 2017, First Horizon completed the stock-cash acquisition deal with Capital Bank Financial Corp. Previously, in April 2017, the company acquired Houston-based financial company — Coastal Securities — for $160 million in cash. Strengthening its restaurant franchise finance business, in September 2016, First Horizon acquired the restaurant franchise loans from GE Capital worth $535 million. Also, last year, the company fortified its North Carolina footprint with the acquisition of Raleigh, N.C.-based TrustAtlantic Financial Corp.
Strong Leverage: First Horizon’s debt/equity ratio is valued at 0.38 compared to the S&P 500 average of 0.70, indicating relatively lower debt burden. It highlights the financial stability of the company even during adverse economic conditions.
Superior Return on Equity (ROE): First Horizon’s ROE of 9.4%, compared with the industry’s 8.39% average, highlights the company’s commendable position over its peers.
Stock is Undervalued: First Horizon has P/E and P/B ratios of 15.75 and 1.7 compared to the S&P 500 average of 19.11 and 3.4, respectively. Based on these ratios, the stock seems undervalued.
Bottom Line
Dual focus on restructuring and cost control is likely to boost the company’s profitability. In addition, its asset base remains stabilized. Moreover, the company’s efforts to strengthen its core Tennessee banking franchise bode well for the long term.
Other Stocks to Consider
Legg Mason Inc. has been witnessing upward estimate revisions for the past seven days. Also, the company’s shares have returned nearly 8% over the past six months. It flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Federated Investors Inc. has been witnessing upward estimate revisions for the last 60 days. The company’s shares have appreciated 19.6% in six months. It carries a Zacks Rank of 2 (Buy).
Artisan Partners Asset Management Inc. (APAM - Free Report) has been witnessing upward estimate revisions for the past two months. Additionally, the stock has rallied more than 25% in six months. It currently holds a Zacks Rank of 2.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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Here's Why First Horizon is a Must Add to Your Portfolio
Improving operating backdrop, rising rate environment, anticipated tax benefit from the U.S. tax reform and the strengthening domestic economy are projected to continue supporting banking stocks. Keeping this in mind, we have selected First Horizon National Corporation (FHN - Free Report) for your portfolio.
With focus on positive operating leverage and sturdy balance-sheet growth across multiple areas, First Horizon appears a promising buying opportunity now. The company’s restructuring activities and expansion mode are anticipated to yield positive results for the stock.
Further, shares of this Zacks Rank #1 (Strong Buy) company have gained around 15.1% in six months’ time, outperforming 7% growth recorded by the industry.
First Horizon has a number of other aspects that make it an attractive investment option.
Why is First Horizon a Must Buy?
Benefit from Rate Hike: With a rise in rates, banks are likely to engage in more investment activities. This rate hike will also allow banks to lend at higher rates. As First Horizon currently derives around 60% of its revenues from net interest income, the company is set to benefit from the recent rate hikes.
Earnings Strength: First Horizon recorded earnings growth rate of 41.7% over the last three to five years. Retaining the earnings momentum, the earnings growth rate is anticipated to be around 18.1% for the current year and around 16% for 2018. Good news is that the company generated an average positive earnings surprise of around 0.6% over the trailing four quarters.
Prudent Expense Management: First Horizon’s cost-containment measures have supported bottom-line improvement for the past several quarters. Though non-interest expenses underlined a volatile trend in the past few years, the company remains committed toward expense management, through process improvement, branch network optimization and other efficiencies. Notably, the company recorded a negative three-year CAGR of 22% (2012-2014), it escalated year over year in 2015. However, it declined 12.2% in 2016 and 1.5% in the first nine months of 2017, highlighting First Horizon’s cost-control efforts.
Strategic Moves: First Horizon has executed several strategic repositioning efforts to improve its long-term profitability. Forming the fourth largest regional bank in the Southeast, in November 2017, First Horizon completed the stock-cash acquisition deal with Capital Bank Financial Corp. Previously, in April 2017, the company acquired Houston-based financial company — Coastal Securities — for $160 million in cash. Strengthening its restaurant franchise finance business, in September 2016, First Horizon acquired the restaurant franchise loans from GE Capital worth $535 million. Also, last year, the company fortified its North Carolina footprint with the acquisition of Raleigh, N.C.-based TrustAtlantic Financial Corp.
Strong Leverage: First Horizon’s debt/equity ratio is valued at 0.38 compared to the S&P 500 average of 0.70, indicating relatively lower debt burden. It highlights the financial stability of the company even during adverse economic conditions.
Superior Return on Equity (ROE): First Horizon’s ROE of 9.4%, compared with the industry’s 8.39% average, highlights the company’s commendable position over its peers.
Stock is Undervalued: First Horizon has P/E and P/B ratios of 15.75 and 1.7 compared to the S&P 500 average of 19.11 and 3.4, respectively. Based on these ratios, the stock seems undervalued.
Bottom Line
Dual focus on restructuring and cost control is likely to boost the company’s profitability. In addition, its asset base remains stabilized. Moreover, the company’s efforts to strengthen its core Tennessee banking franchise bode well for the long term.
Other Stocks to Consider
Legg Mason Inc. has been witnessing upward estimate revisions for the past seven days. Also, the company’s shares have returned nearly 8% over the past six months. It flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Federated Investors Inc. has been witnessing upward estimate revisions for the last 60 days. The company’s shares have appreciated 19.6% in six months. It carries a Zacks Rank of 2 (Buy).
Artisan Partners Asset Management Inc. (APAM - Free Report) has been witnessing upward estimate revisions for the past two months. Additionally, the stock has rallied more than 25% in six months. It currently holds a Zacks Rank of 2.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>