TD - First Horizon gets Neutral rating at J.P. Morgan on challenged earnings power

2023-06-13 08:34:19 ET

First Horizon ( NYSE: FHN ) stock dipped 2% in Tuesday premarket trading after J.P. Morgan gave the regional bank stock a Neutral rate after a period of restriction when it was not rated (Overweight rating prior to restriction).

"The earnings power of the franchise would be challenged over the near-term with expenses likely to run at an elevated pace at least through 2024," analyst Steven Alexopoulos wrote in a note.

The company managed to retain 87% of its employees while waiting for the merger with TD Bank Group ( TD ) to progress through retention packages, "which are expected to persist over the near-term and pressure expenses higher."

On May 4, First Horizon ( FHN ) shares tumbled over 30% after it and TD ( TD ) ended their previously announced merger agreement with uncertainty over obtaining regulatory approvals looming more than a year after the two companies agreed to the deal. An FHN investor ended up suing TD over its failed $13B acquisition.

As a result of the costly retention packages, Alexopoulos contended, "not only do we see EPS in 2023 declining y/y, but we also see 2024 EPS declining further given pressure on both revenue and expense."

The Neutral rate falls between SA's Quant system rating of Sell and the average sell-side analyst rating of Buy.

More on First Horizon

• Jefferies turns bullish on First Horizon on robust capital, attractive valuation

• BofA resumes coverage of First Horizon at Buy as it is 'well-capitalized'

• First Horizon Q1 earnings miss as higher funding costs weigh on NII

• First Horizon's Plunge Presents A Calculated Buying Opportunity

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