Investors like clean beat-and-raise quarters, and they didn’t get that from First Horizon (FHN) this quarter. The first couple of quarters after large mergers are often messy, so no real surprise there, but the underlying guidance for weaker core net interest margin wasn’t welcome in a quarter where “stabilization” has been the overall theme. Likewise, First Horizon’s credit quality remains a negative talking point and the core profitability is still not impressive.
None of this should really be a surprise, but the Street wants what it wants, and stocks get sold off when it doesn’t get it. On a core basis, nothing has changed for me with respect to modeling, my bullish drivers, or my bearish concerns. First Horizon management has a lot to prove – they have to prove they’ve learned their lessons on credit/underwriting quality and they must prove that this newly-enlarged bank can be more than a middle-of-the-road performer where profitability is concerned. My position is that they will prove this over time, and that the shares can deliver a mid-teens annualized return from here, but investors are going to have to be patient with this one.
Read the full article here:
Messy Initial Results Should Not Obscure The Long-Term Value At First Horizon
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