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First Horizon (FHN) Stock Up as Q4 Earnings & Revenues Rise

Zacks Equity Research

Shares of First Horizon National Corporation FHN have gained 4.3%, following the release of fourth-quarter 2019 results. Adjusted earnings per share of 47 cents surpassed the Zacks Consensus Estimate of 42 cents. Further, the bottom line was 34.3% higher than the year-ago figure.

Results reflect First Horizon’s improved deposits balance and higher revenues. In addition, efficiency ratio contracted during the quarter, indicating increased profitability. However, rising expenses and provisions were major drags.

After considering certain non-recurring items, net income available to common shareholders came in at $116.8 million or 37 cents per share, up from $96.3 million or 30 cents per share recorded in the prior-year quarter.

Segment wise, quarterly net income for regional banking climbed 18.8% year over year to $139.9 million. Fixed income segment’s net income of $19.8 million increased by a wide margin from year-ago quarter. Also, non-strategic segment reported income of $5.7 million, down 14.3%. Corporate segment incurred net loss of $44 million.

For 2019, adjusted earnings were $1.66 per share compared with the prior year’s figure of $1.41. The bottom line outpaced the consensus estimate of $1.56. Net income dropped 19.3% to $434.7 million.

Revenue Growth Offsets Higher Expenses

Total revenues for the fourth quarter came in at $494.7 million, up 19.8% on a year-over-year basis. Also, the top line surpassed the consensus estimate of $472 million.

For 2019, net revenues were $1.9 billion, beating the consensus estimate of $1.8 billion. However, the same declined 4.1% year over year.

Net interest income for the reported quarter improved 2.9% year over year to $311.4 million. Net interest margin shrunk 12 basis points (bps) to 3.26%. Also, non-interest income came in at $183.3 million, up 66.2%.

Non-interest expenses increased 16.1% year over year to $327.5 million.

Efficiency ratio was 66.19% compared with 68.30% in the year-ago quarter. It should be noted that a fall in the efficiency ratio indicates increase in profitability.

Total period-end loans, net of unearned income, totaled $31.1 billion, marginally down from the previous quarter. However, total period-end deposits were $32.4 billion, up 1.5%.

Credit Quality: Mixed Bag

Allowance for loan losses was up 11% year over year to $200.3 million. In addition, non-performing assets increased 3.7% to $181.9 million. Also, during the quarter, the company recorded $10 million in provision for loan losses, up considerably from $6 million a year ago.

However, as a percentage of period-end loans on an annualized basis, allowance for loan losses was 0.64%, down 2 bps year over year. The quarter witnessed net charge-offs of $2.8 million compared with $11.5 million in the prior-year quarter.

Capital Position

Common Equity Tier 1 ratio was 9.20% compared with 9.77% at the end of the year-earlier quarter. Additionally, total capital ratio came in at 11.22%, down from 11.94%.

Our Viewpoint

Backed by a strong balance sheet position, First Horizon’s inorganic growth strategies are likely to be conducive to top-line performance. Also, the company continues to benefit from the merger of Capital Bank Financial Corp. Further, improvement in the efficiency ratio is anticipated to support profitability. Nevertheless, escalating expenses are expected to hamper bottom-line growth. Furthermore, rising provision for loan losses acts as a headwind.

First Horizon National Corporation Price, Consensus and EPS Surprise

 

First Horizon National Corporation Price, Consensus and EPS Surprise

 

First Horizon National Corporation price-consensus-eps-surprise-chart | First Horizon National Corporation Quote


Zacks Rank

First Horizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Release Dates of Peers

U.S. Bancorp USB reported fourth-quarter 2019 adjusted earnings per share of $1.08, in line with the Zacks Consensus Estimate. The bottom line jumped slightly from the prior-year quarter figure.

Riding on high revenues, PNC Financial PNC delivered a positive earnings surprise of 1.7% in fourth-quarter 2019. Earnings per share of $2.97 surpassed the Zacks Consensus Estimate of $2.92. Further, the bottom line reflects an 8% jump from the prior-year quarter’s reported figure.

Associated Banc-Corp ASB is scheduled to announce fourth-quarter 2019 results on Jan 23.

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