On Wednesday, RBC (TSX:RY) Capital adjusted its stock price target for First Horizon National (NYSE:FHN), increasing it to $23.00 from the previous $22.00, while keeping an Outperform rating on the stock.
The $10.69 billion regional bank, currently trading at $20.17, appears undervalued according to InvestingPro Fair Value analysis. The revision follows First Horizon's recent investor conference, where the company shared its financial outlook for the fiscal year 2025.
First Horizon's updated forecast includes expectations for adjusted revenues to remain steady or rise up to 4%, and adjusted expenses to grow between 2% and 4%. The company, which maintains a healthy P/E ratio of 14.74 and boasts a GOOD financial health score according to InvestingPro metrics, also anticipates net charge-offs ranging from 15 to 25 basis points, a tax rate of 21% to 23%, and a Common Equity Tier 1 (CET1) ratio to decrease to between 10.5% and 11.0%.
These projections are based on the assumption of an additional rate cut in December 2024 and three subsequent rate cuts in 2025, coupled with modest balance sheet growth.
The bank's third-quarter 2024 CET1 ratio of 11.2% indicates the possibility of more aggressive share buyback programs than previously forecasted for 2025. To date, First Horizon has repurchased approximately $146 million in shares in the current quarter. Taking into account the updated outlook, RBC Capital has raised its estimated earnings per share (EPS) for 2025 from $1.65 to $1.70 and for 2026 from $1.80 to $1.85.
The new stock price target of $23 reflects the updated earnings expectations and the bank's financial projections for the coming years. First Horizon's new fiscal outlook and RBC Capital's revised price target provide investors with updated guidance on the bank's performance and expected returns.
In other recent news, First Horizon Corporation reported strong third-quarter earnings, surpassing expectations with an earnings per share (EPS) of $0.42, a $0.06 increase from the previous quarter.
The company's pre-provision net revenue also saw a rise of $11 million. Analysts from Baird, RBC Capital Markets, Stephens, and Citi have responded to these results by raising their price targets for First Horizon, maintaining their respective ratings on the stock.
These firms have highlighted First Horizon's ability to offset net interest income pressures with strong fee income and fixed-income trading activities, as well as the company's effective control over core expenses and favorable credit metrics. Despite ongoing margin challenges, the company anticipates a modest positive trend in revenue projections, buoyed by fee-based income momentum.
The company's management is preparing for First Horizon to cross the $100 billion asset threshold while maintaining an 11% Common equity Tier 1 (CET1) ratio, a key measure of financial strength. However, it acknowledges that loan growth remains muted due to market factors. These are some of the recent developments at First Horizon Corporation.
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