First Horizon Touches 52-Week High: Should You Buy the Stock Now?

First Horizon Corporation FHN shares touched a new 52-week high of $21.01 on Friday before closing the session slightly lower at $20.93.The stock skyrocketed 80.6% in the past year, outperforming its industry’s growth of 50.8%. FHN also outperformed its peers, BancFirst Corporation BANF and Texas Capital Bancshares, Inc. TCBI.Price Performance Image Source: Zacks Investment Research The primary reason behind the stock’s new highs is the optimism surrounding Donald Trump's win in the U.S. presidential election, which is seen as a positive sign for the financial sector, particularly for banks. Also, the Fed rate cuts are driving the banking stocks as it is a positive development for banks reeling under high funding costs. With the Fed rate cuts, FHN’s funding costs are likely to stabilize, aiding net interest income (NII) growth in the future.Does FHN stock have more upside left despite hitting a 52-week high? Let us try to decipher.Factors Likely to Drive First Horizon StockRegulatory Changes After Presidential Election: On Nov. 5, U.S. presidential elections were held, resulting in a victory for Donald Trump. With this, the regulatory landscape is expected to ease, which would benefit banks. The Trump administration is expected to change leadership in numerous federal regulatory organizations that oversee banks and other financial industry firms.Currently, the Consumer Financial Protection Bureau oversees banks' consumer fee income and wants to enforce strict regulations on how much they can charge for services. With the new administration, banks, including FHN, expect looser regulations. This will allow it to earn more fee income and bolster its top line, which has been under pressure from erratic spread income.Fed Rate Cut:  FHN’s NII (FTE basis) has witnessed a four-year CAGR of 20.6%, ending 2023. Higher interest rates propelled NIM, which increased to 3.42% in 2023 from 3.10% in 2022. Both NII and NIM declined in the first nine months of 2024.The Federal Reserve has started cutting interest rates. The central bank lowered the rates by 75 basis points (bps) and the market participants expect another 25-bps cut in December. This is likely to support FHN, TCBI and BANF’s NII growth over the long term as funding costs gradually stabilize. Rising Loans & Deposit Balance: First Horizon has been witnessing continued loan growth. The company’s loans and leases saw a compound annual growth rate (CAGR) of 18.7% in the last four years (2019-2023). Deposits witnessed a CAGR of 19.3% in the same time frame. The improvement was driven by acquisitions completed during that period and a diversified loan portfolio. Both metrics increased in the first nine months of 2024. Management expects loan growth to continue in the upcoming period, driven by the lower interest rates from the Fed’s recent rate cuts. With a strong business mix of regional and specialty banking franchises across its attractive, high-growth market, we believe that the company is well-positioned to witness loan and deposit growth.Few Concerns Prevail for FHNElevated Mortgage Rates: Weakness in First Horizon’s mortgage banking business is creating a headwind. The company witnessed a decline in mortgage banking and title income, seeing a CAGR of 35% from 2020 to 2023. The trend reversed in the first nine months of 2024. However, origination volumes and refinancing activities are less likely to witness solid improvements in the near term as mortgage rates are expected to remain on the higher side. Per the November 2024 commentary from the Fannie Mae Economic and Strategic Research Group, the mortgage rate outlook has been revised upward for 2024 and 2025. This is attributable to the rise in bond rates since the September FOMC meeting. Higher mortgage rates will undeniably take a toll on origination and refinancing volumes.Hence, First Horizon’s mortgage banking business is less likely to record solid growth in the near term.Loan Concentration: First Horizon’s loan portfolio comprises commercial and commercial real estate loans (76.5% of the period-end loans as of Sept. 30, 2024). The volatile macroeconomic backdrop has put a strain on commercial lending. Moreover, the asset quality of the loan category has deteriorated. Thus, the lack of loan portfolio diversification is likely to hurt the company’s financials if the economic situation worsens.Should You Buy FHN Stock Now?First Horizon’s rising loans and deposit balances, along with Fed rate cuts, are expected to aid its financials in the long run. An easing regulatory landscape under the new administration is likely to support the company’s top-line expansion. Driven by favorable factors, FHN earnings are expected to rise in 2024 and 2025.Earnings Estimates Image Source: Zacks Investment Research Find the latest earnings estimates and surprises on Zacks Earnings Calendar.The rising mortgage rates might hurt the company’s mortgage banking business in the coming period. The lack of loan portfolio diversification is concerning.First Horizon's lower liquidity levels are discouraging. As of Sept. 30, 2024, its cash and dues from the bank and interest-bearing deposits with banks were $2.3 billion, whereas its total debt (comprising short-term borrowings and term borrowings) was $3.8 billion. With a low liquidity position, the company might find it difficult to meet its debt obligations if the economic situation worsens.Thus, the FHN stock is a cautious bet for investors now. Those who already own the stock can hold on to it because it is less likely to disappoint over the long term. First Horizon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Texas Capital Bancshares, Inc. (TCBI): Free Stock Analysis Report First Horizon Corporation (FHN): Free Stock Analysis Report BancFirst Corporation (BANF): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks