First Horizon Rides High On Inorganic Growth Strategies

On Aug 21, we issued an updated research report on First Horizon National Corp. (NYSE:FHN) .The company has benefited greatly from its inorganic growth strategies and cost control initiatives. However, pending legal issues relating to mortgage repurchases are likely to weigh on its financials.

First Horizon pulled off a positive earnings surprise in the second quarter. The results reflected improved net interest income and loans balance. Also, lower expenses were a tailwind.

Shares of First Horizon have lost 15.5% in the past six months, compared to 10.9% decline for the industry.

The Zacks Consensus Estimate for current-year earnings have remained stable at $1.12 over the last 30 days. Thus, the stock carries a Zacks Rank #3 (Hold).

The company has been focusing on inorganic growth strategies lately, which have helped improve its top line. It completed the acquisition of Houston-based Coastal Securities in April 2017, following which in May 2017, it announced the buyout of Capital Bank Financial Corp. (NASDAQ:CBF) . With these acquisitions,First Horizon has become the fourth largest regional bank in the Southeast.

Further, First Horizon’s cost-control measures led to a decline in expenses over the past few quarters. Further, the company remains focused on managing expenses through process improvement, branch network optimization and other efficiencies. These measures are likely to continue improving its bottom line in the quarters ahead.

However, mortgage repurchase issues have impacted First Horizon’s performance in the last few years. The company seeks to solve several mortgage repurchase-related litigations, mainly due to the origination and the sale, securitization or government insurance of residential mortgage loans before 2009. Settling such legal issues is expected to weigh on its financials.

Stocks to Consider

A couple of better-ranked stocks in the same space are Carolina Financial Corporation (NASDAQ:CARO) and Comerica Incorporated (NYSE:CMA) .

Carolina Financial witnessed an upward earnings estimate revision of 4.3% for the current year, over the last 30 days. Its share price has increased 57.1% in the past12 months. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comerica carries a Zacks Rank #2 (Buy). For current-year earnings, its Zacks Consensus Estimate was revised 3.1% upward in the last 60 days. The company’s share price has increased 50% in a year’s time.

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