First Horizon Rallies 9.4% in a Year: How to Play the Stock Now?

FHN's stock has outperformed the industry over the past year. Can revenue growth and profitability gains pave the way for further upside?

Zacks Equity Research

5 min read

Shares of First Horizon Corporation FHN have gained 9.4% in the past year, outperforming the industry’s 8.9% growth.

However, if we compare the company’s price performance with its close peers like BOK Financial Corporation BOKF and Texas Capital Bancshares, Inc. TCBI, it appears that FHN shares have underperformed both. In the past year, BOKF shares have rallied 27.4%, while TCBI stock has gained 14.1%.

Price Performance

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Does FHN stock have more upside left despite its recent price strength? Let us find out by looking at its fundamentals and growth prospects.

Key Positives of First Horizon

Revenue Growth: The company’s revenues have witnessed a six-year compound annual growth rate (CAGR) of 6.5% through 2025, with the growth trend continuing in the first half of 2026. Its NII recorded a six-year CAGR of 13.8% through 2025, supported by balance-sheet growth and disciplined asset-liability management, with growth continuing in the first half of 2026. Lower funding costs, continued loan growth, relationship-based deposit gathering and reinvestment at higher yields are expected to support NII growth in the upcoming period.

Meanwhile, the company’s non-interest income recorded a six-year CAGR of 3.4% through 2025 and increased in the first half of 2026. Growth in wealth management, treasury management and commercial specialty services is helping FHN to expand its fee-based revenue streams. The strategic partnership with LPL Financial in April 2025 further strengthened its wealth-management capabilities, while the 2020 Iberiabank merger expanded its customer base and cross-selling opportunities. Continued NII growth and broader fee-generating opportunities are expected to support FHN’s top-line performance.

The Zacks Consensus Estimate for FHN’s 2026 and 2027 revenues is pegged at $3.5 billion and $3.7 billion, respectively, which indicate year-over-year growth rates of 3.5% and 3.9%.

Revenue Estimates

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Expanding Balance Sheet: The company’s balance sheet remains on a growth trajectory, supported by relationship-driven lending and a diversified banking franchise. Its loans and leases and deposits posted CAGRs of 12.9% and 13%, respectively, from 2019 to 2025, with both growing year over year in the first half of 2026. Commercial and industrial lending and steady mortgage activity are supporting loan growth, while promotional and non-interest-bearing deposits are strengthening the deposit base.

Management expects mid-single-digit balance-sheet growth in 2026, backed by healthy pipelines across business lines and markets. Its regional and specialty banking franchises in high-growth markets are helping attract and retain customers. Continued loan demand, deposit growth and deeper client relationships are expected to support balance-sheet expansion in the coming quarters.

Focus on Profitability Enhancement: FHN is strengthening profitability through revenue growth and disciplined execution. Its adjusted return on tangible common equity reached 15.3% in the second quarter of 2026, marking the fourth consecutive quarter above 15%. Adjusted pre-provision net revenue (PPNR) increased from $750 million in 2019 to $1.46 billion in the first half of 2026, demonstrating the company’s stronger earnings-generating capacity. Building on this momentum, the company is targeting positive operating leverage and sees more than $100 million of additional revenue-driven PPNR opportunity by 2027 through deeper client relationships, higher product penetration and better coordination across business lines.

PPNR Growth Trend

Image Source: First Horizon Corporation

By expanding treasury management, wealth management and regional-specialty partnerships, First Horizon aims to deepen client relationships and increase fee income. Its diversified business model and attractive geographic footprint also support performance across economic cycles. Counter-cyclical businesses, including fixed income, loans to mortgage companies and mortgage banking, can help offset pressure on its asset-sensitive balance sheet when interest rates decline. Overall, revenue diversification and disciplined execution are expected to support sustainable profitability and long-term growth.

Decent Liquidity Supports Capital Returns: FHN maintains a decent liquidity position. As of June 30, 2026, cash and interest-bearing deposits totaled $2.2 billion, while short-term and term borrowings stood at $842 million and $1.3 billion, respectively.

This liquidity position provides FHN with flexibility to support shareholder returns while investing in balance-sheet growth. The company has an active share repurchase program, with $665 million remaining under its $1.2 billion authorization as of June 30, 2026.

Apart from share repurchases, the company continues to return capital through dividends. In January 2026, First Horizon raised its quarterly dividend by 13.3% to 17 cents per share. The company has raised its dividend once over the past five years, resulting in a five-year annualized dividend growth rate of 1.4%. Its current dividend yield of 2.8% compares favorably with the industry average of 2.2%. Meanwhile, BOKF and TCBI offer dividend yields of 1.8% and 0.8%, respectively. Overall, FHN’s liquidity position provides a solid foundation for continued shareholder returns.

Dividend Yield

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FHN’s Near-Term Headwinds

Elevated Expense Level: The company’s noninterest expenses have increased over the past several years, recording a CAGR of 8.9% from 2019 to 2025. Although management continues to focus on cost control, expenses increased year over year in the first half of 2026. Management expects adjusted expenses, excluding deferred compensation, to remain roughly flat in 2026. However, continued investments in talent, technology and client acquisition may keep the expense base elevated in the near term.

Expense Trend

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Loan Concentration Risk: FHN’s loan portfolio remains concentrated in commercial categories. As of June 30, 2026, commercial and industrial (C&I) loans, excluding loans to mortgage companies, and commercial real estate (CRE) loans accounted for about 71% of period-end loans. This concentration increases exposure to economic volatility, particularly if business conditions weaken.

Analyst Sentiments for FHN

Over the past week, the Zacks Consensus Estimate for First Horizon’s 2026 and 2027 earnings has remained unchanged, indicating a neutral analyst sentiment. The estimates imply year-over-year growth rates of 13.8% and 8.7% for 2026 and 2027, respectively.

Estimate Revision Trend

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Final Thought on First Horizon

Continued loan and deposit growth, supported by strong client relationships, is expected to drive NII. The company’s focus on treasury management, wealth management and specialty banking is likely to further diversify revenue and strengthen its fee-generating capabilities. A solid liquidity position should support balance-sheet growth and continued capital returns.

In terms of valuation, FHN stock appears inexpensive relative to the industry. The company is currently trading at a 12-month trailing price-to-earnings (P/E) ratio of 10.8X, which is lower than the industry’s 12.3X.

Price-to-Earnings F12 M

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However, investors should remain mindful of the risks. Persistently elevated expenses could weigh on profitability, while FHN’s concentration in commercial lending leaves it vulnerable to potential deterioration in credit quality. Moreover, neutral analyst sentiment toward the company’s earnings outlook suggests limited visibility into near-term growth prospects.

Nevertheless, FHN’s solid capital position, revenue diversification and balance-sheet growth provide a favorable foundation for long-term value creation. Existing investors may continue to hold the stock, while potential investors could wait for stronger earnings momentum and better expense control before taking a more aggressive stance.

Currently, FHN carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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