Keefe Bruyette raises First Horizon stock price target on guidance By Investing.com

Keefe, Bruyette & Woods raised First Horizon National’s price target to $26 from $25 while keeping a Market Perform rating, citing sustained profitability, controlled expenses, and durable revenue streams. The bank reiterated 2026 guidance and reported a third straight quarter with 15% return on tangible common equity; it also recently posted Q1 2026 EPS of $0.53 versus $0.50 expected, though revenue of $862 million missed the $868.91 million consensus. The move is supportive but not a major catalyst given the unchanged rating and relatively muted upside implied.

Analysis

The key signal is not the modest target raise itself, but that the market is already paying up for a bank whose earnings quality is improving faster than the multiple implies. A 12x-ish P/E with a sub-0.4 PEG is usually a setup for multiple expansion only if management can keep converting capital into earnings without leaning on rate beta; the fact that returns are being driven by expense discipline and credit resilience makes this a more durable story than a pure NII rebound. That said, the stock’s strong 12-month run means incremental good news is increasingly about confirmation, not surprise.

Second-order, this kind of name tends to benefit from a broader regional-bank re-rating only if investor confidence shifts from “survive and normalize” to “compound and buy back stock.” If deposit costs keep falling and charge-offs stay benign, the real upside is not another 5% in consensus EPS, but a higher terminal multiple as the market begins to underwrite capital return optionality. The risk is that the market has already anticipated most of that through the recent move, so the next leg depends on evidence that loan growth and fee income can hold up if rates stay rangebound.

The contrarian read is that this may be a quality bank, but not yet a mispriced one. The firm’s fundamental stance sounds right, yet the valuation screen is less compelling once you adjust for the bank’s already-stabilized profitability and the fact that “fair value” tools often lag rapid revisions in asset quality and expense trends. In other words: this is better viewed as a hold-to-slight-overweight for compounding, not a chase-the-breakout trade. Watch for any downtick in net interest margin sensitivity or a softening in commercial credit; those would matter more than one quarter’s earnings beat.

Key Decisions for Investors

• Avoid chasing FHN after the recent rerating; use pullbacks toward the pre-earnings reaction low to build a small long, with a 6-9 month horizon and 10-15% upside to the new target but limited near-term catalyst density.
• Pair trade: long FHN / short a lower-quality regional bank with more rate-beta and weaker credit metrics over the next 1-2 quarters; the cleaner execution profile should outperform if the sector re-rates on earnings quality rather than revenue growth.
• If already long FHN, sell covered calls 1-2 months out to monetize muted upside while preserving core exposure; the stock’s realized move suggests near-term upside may be capped unless guidance is raised again.
• For event-driven accounts, wait for the next quarterly report before adding meaningful size; the trade needs confirmation that expense control and credit trends persist into a flatter-rate environment, not just one clean print.