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

Core Viewpoint - First Horizon National's recent earnings report shows mixed results, with adjusted earnings per share beating estimates but declining year over year, raising questions about future performance as the stock has outperformed the S&P 500 recently [1][2]. Financial Performance - Adjusted earnings per share for Q1 2024 were 35 cents, exceeding the Zacks Consensus Estimate by one cent, but down 22.2% from the previous year [2]. - Total revenues decreased by 4.7% year over year to $819 million, although this was above the Zacks Consensus Estimate of $807.9 million [3]. - Net interest income (NII) fell by 9.2% year over year to $625 million, with the net interest margin shrinking by 51 basis points to 3.37% [3]. - Non-interest income increased by 13.5% year over year to $194 million, while non-interest expenses rose by 7.7% to $515 million [3]. Credit Quality - Non-performing loans and leases increased by 19.1% year over year to $505 million, with net charge-offs rising to $40 million from $16 million in the prior year [5]. - The provision for credit losses remained flat at $50 million, and the allowance for loan and lease losses decreased by 10.1% year over year to $787 million [5][6]. Capital Ratios - As of March 31, 2024, the Common Equity Tier 1 (CET1) ratio improved to 11.3% from 10.4% a year ago, while the total capital ratio rose to 13.9% from 13.6% [7]. 2024 Outlook - Adjusted NII is projected to increase by 1-4% from $2.56 billion reported in 2023, and adjusted fee income is expected to rise by 6-10% from $699 million in 2023 [8][9]. - Adjusted expenses are anticipated to grow by 4-6% from $1.88 billion in 2023 due to investments in technology and personnel [9]. - The net charge-off ratio is expected to be between 25-35 basis points, reflecting ongoing macroeconomic uncertainty [9]. - The effective tax rate is forecasted to be between 21-23% [10]. Market Sentiment - Recent estimates for First Horizon have shown an upward trend, indicating positive market sentiment [11]. - The stock currently holds a Zacks Rank of 1 (Strong Buy), suggesting expectations for above-average returns in the coming months [13].