First Horizon stock rating raised to Outperform at Baird

On Monday, Baird analysts made a bullish call on First Horizon National (NYSE:FHN), lifting the bank’s stock rating from Neutral to Outperform and setting a price target of $22.00. The upgrade reflects a positive outlook on the company’s financial performance and potential private market transactions. The timing appears opportune, as InvestingPro data shows the stock’s RSI indicating oversold territory, following significant price declines over the past three months.

First Horizon’s current trading metrics were highlighted as particularly compelling by Baird, with the stock trading near approximately 5.5 times forward pre-provision net revenue (PPNR) and around 1.25 times tangible book value (TBV). These valuations were deemed attractive by the analysts, both on a relative and absolute basis, especially given the bank’s return on tangible common equity (ROTCE) projections of 13.5% for 2025 and 14.5% for 2026. Supporting this outlook, InvestingPro reveals that First Horizon has maintained consistent profitability over the last twelve months and has impressively sustained dividend payments for 15 consecutive years. Discover 8 more exclusive InvestingPro Tips and comprehensive analysis in the Pro Research Report.

The firm’s capital levels were also noted to be above those of its peers, with a current buyback authorization reflecting about 12% of the market cap. This financial strength positions First Horizon favorably for future returns to shareholders. Indeed, InvestingPro data confirms management has been aggressively buying back shares, while four analysts have recently revised their earnings expectations upward for the upcoming period.

Baird’s analysts believe that the Southeast-based financial institution has a strong appeal for larger regional players, suggesting that First Horizon could command a premium in a private market transaction. They estimate that several larger regional banks would be willing to pay approximately 1.7 times TBV or higher for First Horizon. This represents a potential upside of 30% to 35%, driven by the bank’s attractive Southeast footprint, potential for significant cost savings, and a clean balance sheet.

The analysts’ comments underscore the belief that First Horizon’s current market position and financial health offer a compelling risk/reward scenario for investors, with significant upside potential in the event of a private market deal. The bank’s robust capitalization and favorable market valuation are key factors in Baird’s upgraded outlook.

In other recent news, First Horizon Corporation reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an adjusted earnings per share (EPS) of $0.42, exceeding the forecasted $0.39. However, the company reported revenue of $729 million, falling short of the projected $820.34 million. This earnings announcement follows the appointment of Jeffrey J. Brown to First Horizon’s Board of Directors, bringing significant financial sector experience from his previous role as CEO of Ally Financial (NYSE:ALLY) Inc. Additionally, the company announced board changes, with Harry V. Barton, Jr. retiring and the board expanding temporarily to fourteen members before returning to thirteen post-election.

These developments come amidst First Horizon’s strategic focus on maintaining strong capital ratios and disciplined expense management. The company has also been active in adjusting its board structure, with Rosa Sugrañes announcing her retirement effective at the 2025 annual meeting of shareholders. Analyst firms have not reported any upgrades or downgrades for First Horizon recently, but the company’s financial performance and board changes have been closely monitored.

First Horizon’s financial strategies and board adjustments reflect its ongoing commitment to navigating the competitive financial landscape and preparing for future growth opportunities. The company continues to focus on optimizing operations and leveraging its diversified business model to maintain a stable financial performance.

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