Tuesday, April 30, 2019

First Horizon Seeing Ongoing Challenges In The Core Business

With some turbulence in the core business, rising competitive challenges in its core markets and a comparatively large short interest, First Horizon (FHN) is a more controversial stock than you might initially assume. Management has laid out its case for leveraging its specialty lending franchise to gain share in key growth markets like the Carolinas and Florida while also driving higher efficiency through its “bonefish” restructuring efforts. But the fact remains that spreads are still challenging and competition is still rising.

I believe that sentiment skews negative on First Horizon and that if the company can stabilize and improve, there could be decent rewards here for shareholders. The guide-down for NIM and ROTCE don’t help the case, but a long-term core earnings growth rate around 4% can still support fair value close to $18.

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