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First Horizon (FHN) Up 11.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for First Horizon National (FHN - Free Report) . Shares have added about 11.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is First Horizon due for a pullback? 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 Q1 Earnings Beat Estimates, Expenses Rise

First Horizon’s first-quarter 2024 adjusted earnings per share (excluding notable items) of 35 cents surpassed the Zacks Consensus Estimate by a penny. However, the figure declined 22.2% year over year.

Higher fee income was a positive. However, a fall in NII and loan balances, coupled with a rise in operating expenses, was an undermining factor.

Net income available to common shareholders was $184 million, down 24.3% year over year.

Revenues Fall and Expenses Rise

Total revenues were $819 million, down 4.7% year over year. However, the top line surpassed the Zacks Consensus Estimate of $807.9 million.

NII declined 9.2% year over year to $625 million. Also, the net interest margin shrunk 51 basis points to 3.37%.

Non-interest income was $194 million, which increased 13.5% from the year-ago level.

Non-interest expenses rose 7.7% year over year to $515 million.

The efficiency ratio was 62.92%, up from the year-ago period’s 55.67%. A rise in the efficiency ratio indicates a fall in profitability.

Total period-end loans and leases, net of unearned income, were $61.75 billion, which declined nearly 1% from the end of the previous quarter. Total period-end deposits of $65.74 billion declined marginally.

Credit Quality Worsens

Non-performing loans and leases of $505 million increased 19.1% from the prior-year period. First Horizon witnessed net charge-offs of $40 million, which rose significantly from the year-ago quarter’s $16 million.

Moreover, the provision for credit losses was $50 million, which remained flat from the year-earlier quarter. As of Mar 31, 2024, the ratio of total allowance for loan and lease losses to loans and leases was 1.27%, up from 1.21% reported in the prior-year quarter.

The allowance for loan and lease losses of $787 million declined 10.1% from the year-ago period.

Capital Ratios Improve

As of Mar 31, 2024, the Common Equity Tier 1 ratio was 11.3%, up from 10.4% at the end of the year-ago quarter.

The total capital ratio was 13.9%, up from the year-ago quarter’s 13.6%. The tier 1 leverage ratio was 10.8%, up from 10.7% in the year-ago quarter.

2024 Outlook

Adjusted NII is expected to rise 1-4% from the $2.56 billion reported in 2023.

Adjusted fee income is suggested to rise 6-10% from $699 million in 2023, supported by a rebound in fixed-income and mortgage businesses.

Adjusted expenses are projected to grow 4-6% from $1.88 billion in 2023 due to increased investment in technology and personnel.

The net charge-off ratio is anticipated to be 25-35 bps compared with the 2023 reported figure of 0.28%, reflecting continued macroeconomic uncertainty.

The CET 1 ratio is envisioned to be around 11%.

The effective tax rate is forecast to be 21-23%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, First Horizon has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.


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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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