First Horizon Undervalued, But Really Needs To Show Differentiated Growth To Re-Rate

 

I said that First Horizon (FHN) was a "show me" story back in February of this year (after fourth quarter results), and unfortunately the company really hasn't come through with any substantial evidence of differentiated growth - upside has largely come from areas like reserve releases, which is common in the sector these days. While the long-term story, including synergies from the Iberiabank deal, attractive fee-generating businesses, and an attractive geographical footprint, is still in place, "potential" isn't going to move the shares.

Up about 15% since my last update, First Horizon has basically tracked the regional bank index since then. That's good enough, I suppose, but I want to see reasons to raise estimates on the back of differentiated (positively differentiated) performance. Even so, 4% core growth can still support a fair value close to $20, as can the mid-14%'s ROTCE I expect for 2022. If First Horizon can make that turn and live up to its potential, this could be a big winner, but investors should also recognize the risk that the bank never does differentiate itself from a growth or return perspective.

 

Follow this link to the full article:

First Horizon Undervalued, But Really Needs To Show Differentiated Growth To Re-Rate