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4 Reasons to Add First Horizon (FHN) to Your Portfolio Now
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From the vast universe of banking stocks that have come under the spotlight recently due to the Federal Reserve signaling the end of the current interest rate hike cycle and chances of three cuts in 2024, today we pick First Horizon Corporation (FHN - Free Report) for you. The company offers a profitable investment opportunity based on organic growth expansion and robust fundamentals.
FHN has been witnessing upward estimate revisions, reflecting analysts’ optimism about its earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for its 2024 earnings has exhibited an upward trend.
Further, this Zacks Rank #2 (Buy) stock has gained 22.8% in the past six months compared with the industry’s growth of 11.4%.
Image Source: Zacks Investment Research
Here are some factors that make FHN a viable investment option right now:
Balance Sheet Strength: First Horizon has been witnessing continued loan growth. The company’s loans and leases saw a compound annual growth rate (CAGR) of 22.7% in the last three years (2019-2022). Further, deposits witnessed a CAGR of 25.1% in the same period. Both metrics improved in the first nine months of 2023. With a strong business mix of regional and specialty banking franchises across its attractive high-growth footprint, we believe that the company is well-positioned to witness loan and deposit growth.
Favorable Spread Income: Growth in First Horizon’s net interest income (NII) and net interest margin (NIM) are likely to remain decent, as upcoming rate cuts may reduce funding cost pressure. NII (FTE basis) witnessed a three-year CAGR (ended 2022) of 25.4%. Moreover, higher interest rates propelled NIM to increase throughout 2022. Both metrics increased in the first six months of 2023 but declined in third-quarter 2023. A footprint in higher-growth markets offers scope for gathering lower-cost core deposits. This, along with an asset-sensitive balance sheet (significant exposure to floating rate loans), will likely support margins and NII in the upcoming period.
Stock Looks Undervalued: The stock seems undervalued when compared with the broader industry. Its current price/book, price/earnings (F1), price/cash flow and price/sales ratios are below the industry averages. The stock has a Value Score of B. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Strong Leverage: Currently, FHN has a debt/equity ratio of 0.14. This compares favorably with the industry average of 0.29. Given the relatively lower debt/equity ratio than its peers, the company is expected to be financially stable, even in adverse economic conditions.
Other Bank Stocks Worth Considering
A couple of other top-ranked stocks from the banking space are WSFS Financial Corporation (WSFS - Free Report) and Hilltop Holdings (HTH - Free Report)
Earnings estimates for WSFS have been unchanged for 2023 over the past 30 days at $4.47. The company’s shares have gained 29.9% over the past six months. WSFS Financial currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hilltop Holdings’ earnings estimates have moved 1.8% north for the current year at $1.65 over the past 30 days. In six months’ time, HTH’s shares have gained 14.1%. The company sports a Zacks Rank #1 at present.
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4 Reasons to Add First Horizon (FHN) to Your Portfolio Now
From the vast universe of banking stocks that have come under the spotlight recently due to the Federal Reserve signaling the end of the current interest rate hike cycle and chances of three cuts in 2024, today we pick First Horizon Corporation (FHN - Free Report) for you. The company offers a profitable investment opportunity based on organic growth expansion and robust fundamentals.
FHN has been witnessing upward estimate revisions, reflecting analysts’ optimism about its earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for its 2024 earnings has exhibited an upward trend.
Further, this Zacks Rank #2 (Buy) stock has gained 22.8% in the past six months compared with the industry’s growth of 11.4%.
Image Source: Zacks Investment Research
Here are some factors that make FHN a viable investment option right now:
Balance Sheet Strength: First Horizon has been witnessing continued loan growth. The company’s loans and leases saw a compound annual growth rate (CAGR) of 22.7% in the last three years (2019-2022). Further, deposits witnessed a CAGR of 25.1% in the same period. Both metrics improved in the first nine months of 2023. With a strong business mix of regional and specialty banking franchises across its attractive high-growth footprint, we believe that the company is well-positioned to witness loan and deposit growth.
Favorable Spread Income: Growth in First Horizon’s net interest income (NII) and net interest margin (NIM) are likely to remain decent, as upcoming rate cuts may reduce funding cost pressure. NII (FTE basis) witnessed a three-year CAGR (ended 2022) of 25.4%. Moreover, higher interest rates propelled NIM to increase throughout 2022. Both metrics increased in the first six months of 2023 but declined in third-quarter 2023. A footprint in higher-growth markets offers scope for gathering lower-cost core deposits. This, along with an asset-sensitive balance sheet (significant exposure to floating rate loans), will likely support margins and NII in the upcoming period.
Stock Looks Undervalued: The stock seems undervalued when compared with the broader industry. Its current price/book, price/earnings (F1), price/cash flow and price/sales ratios are below the industry averages. The stock has a Value Score of B. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Strong Leverage: Currently, FHN has a debt/equity ratio of 0.14. This compares favorably with the industry average of 0.29. Given the relatively lower debt/equity ratio than its peers, the company is expected to be financially stable, even in adverse economic conditions.
Other Bank Stocks Worth Considering
A couple of other top-ranked stocks from the banking space are WSFS Financial Corporation (WSFS - Free Report) and Hilltop Holdings (HTH - Free Report)
Earnings estimates for WSFS have been unchanged for 2023 over the past 30 days at $4.47. The company’s shares have gained 29.9% over the past six months. WSFS Financial currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hilltop Holdings’ earnings estimates have moved 1.8% north for the current year at $1.65 over the past 30 days. In six months’ time, HTH’s shares have gained 14.1%. The company sports a Zacks Rank #1 at present.