After three straight quarterly earnings beats, First Horizon National (FHN) - Get First Horizon National Corporation Report now belongs on investors' radar. The beaten-down and relatively unknown bank could outperform the market in the next 12 to 18 months.
First Horizon does't get the same level of recognition as other regional banks such as PNC Financial (PNC) - Get PNC Financial Services Group, Inc. Report or Comerica (CMA) - Get Comerica Incorporated Report . But this Tennessee-based bank is building a strong franchise on diligent costs controls, while consistently growing revenue. The Federal Reserve will likely raise interest rates in the near future, and First Horizon shares looks like a solid bargain.
The stock closed Friday at $14.81, down 1.66%. That translates to a five-day decline of 5.25%. The shares have risen 2% year to date, underperforming the 4.4% rise in the S&P 500 (SPX) index, while besting the 0.2% rise in the SPDR KBW Regional Banking ETF (KRE) - Get SPDR S&P Regional Banking ETF Report
Last week's decline came after First Horizon posted better-than-expected results for the 2016 third quarter on Friday. The company reported earnings of 27 cents per share, which beat consensus estimates of 25 cents per share, while revenue of $333.74 million grew an impressive 16.5% year over year and topped the Street's projections of $326.61 million.
With First Horizon stock currently trading in the $14 range, the company is priced at just 15.5 times fiscal 2016 estimates of 95 cents per share, about two points below the price-to-earnings ratio of the average stock in the S&P 500 index. That P/E falls to 13 based in fiscal 2017 estimates of the $1.06 per share.
If First Horizon does earn $1.06 per share next year, that would translate to year-over-year earnings growth of 12%, more than twice the growth of the average stock in the S&P 500 index. Plus, those estimates don't factor in the likelihood of a rate hike later this year by the Fed.
If the Fed does take action, First Horizon will be able to make more money on its loans and deposits, which would boost both revenue and earnings.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.