First Horizon (FHN) Earnings Rebound Reinforces Bullish Valuation Narrative for Investors

First Horizon (FHN) posted a 13.2% jump in earnings over the past year, reversing a prior five-year stretch of 4.2% annual declines. Net profit margins stand at 26.9%, up from 24.7% the previous year. Forward guidance calls for earnings and revenue to grow 5.33% and 4.9% per year, respectively, both trailing the pace forecast for the broader US market. With shares currently trading below fair value and analyst targets, and the company offering an attractive dividend alongside high-quality earnings, the latest results set a compelling foundation for investors to weigh against market expectations.

See our full analysis for First Horizon.

Next, we will compare these numbers against the major narratives surrounding First Horizon to see whether the latest earnings reinforce popular views or raise new questions.

See what the community is saying about First Horizon

Net Interest Margin Stability Impresses Analysts

• First Horizon managed interest-bearing deposit costs with a 38 basis point reduction, directly supporting net interest margin expansion prospects as highlighted in the consensus narrative.
• Analysts' consensus view notes that further growth could be driven by ongoing cost discipline and strategic capital deployment through share repurchases.
  • Effective management of deposit costs could enhance overall net interest income, while reducing shares outstanding should lift future EPS even if top-line growth lags typical industry rates.
  • Diversification across business segments and a steady focus on cost controls are seen as vital defenses against potential earnings volatility from macroeconomic disruptions.
• The balance between stable margin management and cautious growth expectations has been a key factor in the consensus outlook. Analysts believe margin resilience forms the basis for sustained performance as economic cycles shift.
• Investors debating whether solid margin execution can drive steadier long-term results will want to read the full consensus perspective on where analysts expect First Horizon to go next. 📊 Read the full First Horizon Consensus Narrative.

Provision Expenses Signal Caution

• Provision expense increased by $30 million year-over-year, while the allowance for credit losses (ACL) to loans ratio ticked up by 2 basis points, both underscoring heightened caution in preparing for possible credit losses.
• Bears argue that this build in provisions is a clear response to growing macroeconomic risks.
  • With net charge-offs up $16 million and a decrease of $5 million in fee income (excluding deferred compensation), concerns intensify regarding the impact of economic headwinds on revenue and net interest margins.
  • Increased provision expenses may tighten future earnings and reduce flexibility if recession-driven credit deterioration worsens.

Valuation Remains a Central Debate

• The current share price of $20.85 remains 17% below the DCF fair value of $37.11 but trades at a price-to-earnings (PE) ratio of 14.2x, higher than the US Banks industry average of 11.9x.
• According to the analysts' consensus view, the narrow gap between the current share price and the analyst target of $25.10 suggests that the market largely sees First Horizon as fairly valued.
  • On one hand, its attractive dividend and profitable operations provide a supportive case for continued investor interest.
  • On the other, tepid earnings and revenue growth forecasts below sector averages create a valuation ceiling, keeping price targets anchored.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for First Horizon on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your First Horizon research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

While First Horizon has made progress on margins and discipline, its earnings and revenue growth lag sector averages. This limits upside potential for investors.

If you want companies growing more consistently, target stable growth stocks screener (2097 results) and discover businesses with a proven pattern of steady earnings and sales across economic cycles.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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