From the vast universe of banking stocks, today we pick First Horizon National Corporation FHN for you. The company offers a profitable investment opportunity based on inorganic growth expansion and robust fundamentals.
The company has been witnessing upward estimate revisions, reflecting analysts’ optimism about its earnings growth potential. Over the past 60 days, the Zacks Consensus Estimate for 2020 has displayed an upward trend.
However, this Zacks Rank #2 (Buy) stock has depreciated around 16%, in the last six months, compared with the industry’s decline of 18.3%.
Why is First Horizon a Golden Egg?
Earnings Strength: First Horizon recorded an earnings growth rate of 16.2% over the last three to five years. Retaining the earnings momentum, the long-term earnings growth rate is anticipated to be 8.13%. Good news is that the company generated an average positive earnings surprise of 6.95%, over the trailing four quarters.
Revenue Strength: Organic growth remains a key strength at First Horizon, as suggested by its decent loan growth. First Horizon witnessed continued loan growth on increase in commercial and consumer loans with a compound annual growth rate (CAGR) of 15.1% in the last five years (2015-2019) with some annual volatility. Further, deposits witnessed a CAGR of 14.7% during the same time period.
The company’s projected sales growth (F1/F0) of 36.7% indicates constant upward momentum in revenues.
Strategic Moves: First Horizon has executed several strategic repositioning efforts to improve the company’s long-term profitability after being affected by its exposure to national mortgage and construction lending, and focused on growing its core Tennessee banking franchise. Also, the company was involved in a number of acquisitions, which diversified its product offerings, and strengthened footprint in the Carolina and Florida markets.
Superior Return on Equity (ROE): First Horizon’s ROE of 10.94%, compared with the industry’s 9.75% average, highlights the company’s commendable position over its peers.
Stock Looks Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. 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: First Horizon’s debt/equity ratio is 0.16 compared with the industry average of 0.22, displaying low debt burden relatively. It highlights the company’s financial stability even in an unstable economic environment.
Other Stocks to Consider
Farmers National Banc Corp. FMNB has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #1 Ranked stock has rallied more than 12% in the last six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
MidWestOne Financial Group, Inc. MOFG has been witnessing upward estimate revisions for the past 60 days. Further, the company’s shares have gained 3.4% in six months’ time. At present, it carries a Zacks Rank of 2.
First Business Financial Services, Inc. FBIZ has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has jumped 8.8% in the last six months. It currently holds a Zacks Rank #2.
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