A month has gone by since the last earnings report for First Horizon National (FHN - Free Report) . Shares have lost about 2.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is First Horizon due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
First Horizon Q4 Earnings & Revenues Beat Estimates
First Horizon reported fourth-quarter 2019 adjusted earnings per share of 47 cents that surpassed the Zacks Consensus Estimate of 42 cents. Further, the bottom line was 34.3% higher than the year-ago figure.
Results reflect First Horizon’s improved deposits balance and higher revenues. In addition, efficiency ratio contracted during the quarter, indicating increased profitability. However, rising expenses and provisions were the major drags.
After considering certain non-recurring items, net income available to common shareholders came in at $116.8 million or 37 cents per share, up from $96.3 million or 30 cents recorded in the prior-year quarter.
Segment wise, quarterly net income for regional banking climbed 18.8% year over year to $139.9 million. Fixed income segment’s net income of $19.8 million increased by a wide margin from the year-ago quarter. However, non-strategic segment reported income of $5.7 million, down 14.3%. Corporate segment incurred net loss of $44 million.
For 2019, adjusted earnings were $1.66 per share compared with the prior year’s figure of $1.41. The bottom line outpaced the consensus estimate of $1.56. Net income dropped 19.3% to $434.7 million.
Revenue Growth Offsets Higher Expenses
Total revenues for the fourth quarter came in at $494.7 million, up 19.8% on a year-over-year basis. Also, the top line surpassed the consensus estimate of $472 million.
For 2019, net revenues were $1.9 billion, beating the consensus estimate of $1.8 billion. However, the same declined 4.1% year-over-year.
Net interest income for the reported quarter improved 2.9% year over year to $311.4 million. Net interest margin shrunk 12 basis points (bps) to 3.26%. Also, non-interest income came in at $183.3 million, up 66.2%.
Non-interest expenses increased 16.1% year over year to $327.5 million.
Efficiency ratio was 66.19% compared with 68.30% in the year-ago quarter. It should be noted that a fall in the efficiency ratio indicates increase in profitability.
Total period-end loans, net of unearned income, totaled $31.1 billion, marginally down from the previous quarter. However, total period-end deposits were $32.4 billion, up 1.5%.
Credit Quality: Mixed Bag
Allowance for loan losses was up 11% year over year to $200.3 million. In addition, non-performing assets increased 3.7% to $181.9 million. Also, during the quarter, the company recorded $10 million in provision for loan losses, up considerably from $6 million a year ago.
However, as a percentage of period-end loans on an annualized basis, allowance for loan losses was 0.64%, down 2 bps year over year. The quarter witnessed net charge-offs of $2.8 million compared with $11.5 million in the prior-year quarter.
Capital Position
Common Equity Tier 1 ratio was 9.20% compared with 9.77% at the end of the year-earlier quarter. Additionally, total capital ratio came in at 11.22%, down from 11.94%.
2020 Outlook
Net interest margin is expected to remain relatively stable through the next couple of quarters.
On account of seasonality of loans to mortgage companies in the first quarter, the same is expected to fall by about $400 million to $500 million, sequentially.
Giving the general level and direction rates along with some expectation of continued market volatility, the company expects the fixed income business to continue reporting solid results in 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 5.67% due to these changes.
VGM Scores
Currently, First Horizon has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise First Horizon has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
A month has gone by since the last earnings report for First Horizon National (FHN - Free Report) . Shares have lost about 2.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is First Horizon due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
First Horizon Q4 Earnings & Revenues Beat Estimates
First Horizon reported fourth-quarter 2019 adjusted earnings per share of 47 cents that surpassed the Zacks Consensus Estimate of 42 cents. Further, the bottom line was 34.3% higher than the year-ago figure.
Results reflect First Horizon’s improved deposits balance and higher revenues. In addition, efficiency ratio contracted during the quarter, indicating increased profitability. However, rising expenses and provisions were the major drags.
After considering certain non-recurring items, net income available to common shareholders came in at $116.8 million or 37 cents per share, up from $96.3 million or 30 cents recorded in the prior-year quarter.
Segment wise, quarterly net income for regional banking climbed 18.8% year over year to $139.9 million. Fixed income segment’s net income of $19.8 million increased by a wide margin from the year-ago quarter. However, non-strategic segment reported income of $5.7 million, down 14.3%. Corporate segment incurred net loss of $44 million.
For 2019, adjusted earnings were $1.66 per share compared with the prior year’s figure of $1.41. The bottom line outpaced the consensus estimate of $1.56. Net income dropped 19.3% to $434.7 million.
Revenue Growth Offsets Higher Expenses
Total revenues for the fourth quarter came in at $494.7 million, up 19.8% on a year-over-year basis. Also, the top line surpassed the consensus estimate of $472 million.
For 2019, net revenues were $1.9 billion, beating the consensus estimate of $1.8 billion. However, the same declined 4.1% year-over-year.
Net interest income for the reported quarter improved 2.9% year over year to $311.4 million. Net interest margin shrunk 12 basis points (bps) to 3.26%. Also, non-interest income came in at $183.3 million, up 66.2%.
Non-interest expenses increased 16.1% year over year to $327.5 million.
Efficiency ratio was 66.19% compared with 68.30% in the year-ago quarter. It should be noted that a fall in the efficiency ratio indicates increase in profitability.
Total period-end loans, net of unearned income, totaled $31.1 billion, marginally down from the previous quarter. However, total period-end deposits were $32.4 billion, up 1.5%.
Credit Quality: Mixed Bag
Allowance for loan losses was up 11% year over year to $200.3 million. In addition, non-performing assets increased 3.7% to $181.9 million. Also, during the quarter, the company recorded $10 million in provision for loan losses, up considerably from $6 million a year ago.
However, as a percentage of period-end loans on an annualized basis, allowance for loan losses was 0.64%, down 2 bps year over year. The quarter witnessed net charge-offs of $2.8 million compared with $11.5 million in the prior-year quarter.
Capital Position
Common Equity Tier 1 ratio was 9.20% compared with 9.77% at the end of the year-earlier quarter. Additionally, total capital ratio came in at 11.22%, down from 11.94%.
2020 Outlook
Net interest margin is expected to remain relatively stable through the next couple of quarters.
On account of seasonality of loans to mortgage companies in the first quarter, the same is expected to fall by about $400 million to $500 million, sequentially.
Giving the general level and direction rates along with some expectation of continued market volatility, the company expects the fixed income business to continue reporting solid results in 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 5.67% due to these changes.
VGM Scores
Currently, First Horizon has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise First Horizon has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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