Will First Horizon (FHN) Miss Earnings this Season?

Zacks Equity Research

First Horizon National Corporation (FHN) is scheduled to report its second-quarter 2014 results before the opening bell on Friday, Jul 18.

In the last quarter, First Horizon delivered a positive earnings surprise of 26.67%, driven by prudent expense management. This was the second consecutive earnings beat reported by the company. While its strong capital position, improving credit quality and growth deposits were reflected, lower top line was a concern.

Will First Horizon be able to keep the earnings streak alive after combating the challenges the industry witnessed during the quarter? Let's see what factors might have influenced the earnings report this time around.

Factors to Influence Q2 Results    

Banks’ efforts to settle lawsuits related to shoddy pre-crisis mortgage practices remained the key trend in the quarter. This was accompanied by dumping unprofitable businesses and concentrating on those with strong potential.

The unfavorable macro issues may weigh on First Horizon's top line and balance sheet in the quarter. Among others, a dismal mortgage market, weak loan growth and stringent regulatory norms in a persistently low interest rate environment are the primary dampeners. Moreover, litigation costs related to recent settlements might drive down profitability.

However, First Horizon has some encouraging traits that may support its results. The company’s endeavors to lower its exposure to problem loans are impressive. It also aims to control costs and improve long-term profitability by focusing on strengthening its core Tennessee banking franchise which might act as a driving factor for the results. Then again, continued expense control and stable balance sheets should act as tailwinds in the quarter.

Activities of First Horizon during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 16 cents per share over the last 7 days.

Earnings Whispers

Our proven model does not conclusively show that First Horizon is likely to beat the Zacks Consensus Estimate in the second quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP:  The Earnings ESP for First Horizon is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 16 cents per share.

Zacks Rank: First Horizon’s Zacks Rank #4 (Sell) further lowers the predictive power of ESP.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

The earnings ESP for Regions Financial Corporation (RF) is +4.76% and it carries a Zacks Rank #3 (Hold). The company is scheduled to release its second-quarter results on Jul 22.

Hancock Holding Company (HBHC) has an earnings ESP of +1.70% and carries a Zacks Rank #3 (Hold). It is scheduled to report its second-quarter results on Jul 24.

Popular, Inc. (BPOP) has an earnings ESP of +10.29% and carries a Zacks Rank #2 (Buy). It is scheduled to report its second-quarter results on Jul 24.

Read the Full Research Report on RF
Read the Full Research Report on BPOP
Read the Full Research Report on FHN
Read the Full Research Report on HBHC

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