FHN vs. CFR: Which Stock Should Value Investors Buy Now?

An analysis comparing First Horizon National (FHN) and Cullen/Frost Bankers (CFR) for value investors identifies FHN as the more attractive option. FHN holds a Zacks Rank #2 (Buy) and a Value Grade of B, outperforming CFR's Zacks Rank #3 (Hold) and Value Grade C. This assessment is supported by FHN's superior valuation metrics, including a lower forward P/E (12.79 vs. 13.52), PEG ratio (1.06 vs. 2.66), and P/B ratio (1.3 vs. 2.01).

Analysis

A comparative valuation analysis of two Southwest regional banks, First Horizon National (FHN) and Cullen/Frost Bankers (CFR), indicates a clear preference for FHN for value-oriented investors. This conclusion is supported by First Horizon's superior positioning in the Zacks Rank system, holding a #2 (Buy) rating versus CFR's #3 (Hold), which signals more favorable earnings estimate revisions and an improving outlook for FHN. On a quantitative basis, FHN presents more attractive valuation metrics across the board. Its forward P/E ratio of 12.79 is lower than CFR's 13.52, and its Price-to-Book (P/B) ratio of 1.3 is substantially more favorable than CFR's 2.01. The most significant differentiator is the PEG ratio, where FHN's 1.06 suggests its valuation is well-aligned with its expected earnings growth rate, while CFR's much higher PEG of 2.66 points to a potential overvaluation relative to its growth prospects. These factors culminate in FHN earning a 'B' for Value in the Style Scores system, compared to a 'C' for CFR.

Key Decisions for Investors

• Value-focused investors should consider First Horizon National (FHN) as a more compelling opportunity than Cullen/Frost Bankers (CFR) due to its stronger earnings outlook and more attractive valuation multiples.
• The significant disparity in the PEG ratio, with FHN at 1.06 versus CFR at 2.66, suggests FHN offers a more reasonable price for its expected growth, a critical factor for both value and GARP strategies.
• Given CFR's 'Hold' rating and comparatively rich valuation on P/E, P/B, and PEG metrics, investors currently holding the stock may want to re-evaluate their position relative to more attractively priced peers like FHN within the Southwest banking sector.