First Horizon (FHN): Growth vs. Profitability — FY2024 Analysis

Stock Surge and a Paradox: Strong Share Performance amid Weaker FY2024 Earnings#

First Horizon [FHN] has delivered a striking market outcome: shares have rallied roughly +36.20% over the past year even as FY2024 reported net income declined -13.60% to $775MM on revenue of $4.94B. This divergence between price action and last fiscal-year profitability creates a clear narrative tension — investors appear to be paying for execution on growth, capital-return programs, and forward-looking PPNR (pre-provision net revenue) improvement rather than for FY2024 earnings alone. The stock-level move has been widely reported in market commentary and investor write-ups, reflecting momentum that partially rests on anticipated rate easing and management targets for ROTCE and PPNR improvement (Nasdaq – First Horizon stock nearly 36% in a year.

Beneath the headline move are measurable operational dynamics: FY2024 revenue rose, operating income remained positive, and the company generated meaningful free cash flow. Yet the drop in net income and several balance-sheet reporting oddities in the data supplied to investors warrant closer inspection. These include inconsistent net‑debt and cash measures across filings and TTM ratios that differ from year-end calculations — discrepancies that matter when assessing leverage, liquidity and the flexibility to sustain buybacks and dividends.

Our review therefore focuses not on the momentum alone but on the hard, verifiable numbers: where revenue and cash flow provide optionality, where margins and provisioning have trended, and where the balance sheet presents both strengths and areas requiring scrutiny. We anchor figures to the company financial statements and the Q2 2025 commentary where relevant (AlphaSpread – First Horizon investor relations; Investing.com – Q2 2025 earnings call highlights.

Income-Statement Trends: Revenue Up, Net Income Down — What the Numbers Show#

On an annual basis, First Horizon’s top line expanded to $4.94B in FY2024 from $4.71B in FY2023, a year-over-year increase we calculate at +4.89%. That revenue growth was broad-based enough to sustain operating income of $1.00B, which we calculate as an operating-income-to-revenue ratio of +20.24% for FY2024. Operating leverage is visible, but it did not fully translate to the bottom line in FY2024 because reported net income fell to $775MM, a contraction versus $897MM the prior year, which equates to -13.60%.

Decomposing the drivers, gross profit held at a healthy level (gross profit of $2.95B, gross-profit margin roughly 59.67% as reported). The main pressure on net income appears to be rising operating expenses and provisioning dynamics: operating expenses are recorded at $1.94B for FY2024, and selling/general/admin alone was $1.3B. The company’s reported EBITDA of $1.11B implies an EBITDA margin near 22.44% (our calculation: 1.11B / 4.94B = +22.45%), reflecting meaningful profitability at the operating level but with net income compression after taxes and other line items.

Earnings-per-share dynamics and TTM multiples align with the market price: the provided trailing EPS metrics (netIncomePerShareTTM $1.66) imply a P/E of roughly 13.53x given the current price near $22.45 (22.45 / 1.66 = 13.53x), which is broadly consistent with the peer band for well‑executing regional banks trading on mid‑teens multiples ([stock quote data]).* This P/E indicates that investors are valuing FHN on a multiple of expected earnings power rather than on FY2024 alone.

Income Statement — Four-Year Snapshot#

(Data sourced from the company’s FY results as provided; we calculated growth and margin percentages directly from the raw figures supplied — see AlphaSpread – investor relations.

Balance Sheet and Liquidity: Large Asset Base, Mixed Signals on Net Debt#

First Horizon ends FY2024 with total assets of $82.15B and total stockholders’ equity of $8.82B, producing a simple book‑value multiple (price-to-book) of roughly 1.27x using the current market cap ($11.40B) and reported equity — consistent with the provided price-to-book ratio. The company reports cash and short‑term investments of $8.94B and total debt of $4.59B on the FY2024 balance sheet.

A straightforward calculation from those two line items yields a net-debt position of -$4.35B (total debt 4.59B minus cash & short-term investments 8.94B = -4.35B) — i.e., net cash — which materially differs from the net‑debt figure listed in the supplied dataset (the dataset reports a netDebt of 2.15B). We flag this as a substantive discrepancy: differing definitions of “total debt” (for example, inclusion/exclusion of brokered deposits, repo-style liabilities, or securitizations) or reporting timing differences can reconcile the variance, but investors must treat headline net‑debt numbers with caution and favor a reconciliation in the company’s 10‑K/10‑Q if absolute leverage is a decision driver.

Using the company’s current-balance‑sheet lines, the simple current ratio (total current assets / total current liabilities) computes to 0.13x (8.94B / 69.53B = 0.13x), which is below conventional liquidity comfort bands but typical for banks where deposits (included in current liabilities) are core funding and are matched to liquidity policies. The supplied TTM current ratio of 0.16x likely reflects a different aggregation of liquid assets; nevertheless, the bank’s sizable short-term investments and reported cash cushion support day-to-day funding needs even if the ratio by a strict accounting definition appears low.

Balance Sheet — Four-Year Snapshot and Key Ratios#

(We calculated Net Debt as Total Debt minus Cash + Short-term Investments for comparability; the dataset’s reported netDebt values diverge — we discuss the implications below.)

Cash Flow and Capital Allocation: Free Cash Flow Strength Supports Returns#

First Horizon produced free cash flow of $1.22B in FY2024 with net cash provided by operating activities of $1.27B, reflecting strong cash conversion relative to GAAP net income ($794MM reported in cashflow table vs. the income statement net income $775MM; minor timing differences are expected between consolidated statements). The free‑cash‑flow margin (free cash flow / revenue) calculates to roughly +24.69% (1.22B / 4.94B = +24.69%), which is robust and provides the operational flexibility to fund capital investments, dividends and buybacks.

Management’s capital allocation through FY2024 and into 2025 has combined a steady quarterly dividend of $0.15 (totaling $0.60 per year) and an active repurchase program (a $1.0B authorization with ~$511MM remaining as of mid‑2025). Dividend payout metrics (payout ratio near 42.28% per the dataset) and the repurchase program signal intent to return excess capital while maintaining CET1 objectives. The cash-flow profile supports that approach on a near-term basis, although the precise margin for error depends on credit performance and deposit funding cost dynamics.

Capital deployment has been meaningful in recent periods: common stock repurchases were reported at $626MM used in FY2024's financing activities, while dividends paid totaled $361MM. Together these actions consumed a sizable portion of operating cash flow but remain consistent with the stated ROTCE and capital-return priorities articulated by management in investor communications (AlphaSpread – investor relations.

Strategic Execution: Growth, Technology Investment, and Targets#

First Horizon’s articulated strategy centers on measured balance‑sheet growth (targeting the Southern U.S. market), digitization, and capital discipline aimed at driving ROTCE above 15% and securing > $100MM of PPNR improvement. Management has earmarked roughly $100MM over three years for technology (cloud, AI-enabled workflows, digital channels), a deliberate investment intended to raise long‑term productivity even as it temporarily lifts non‑interest expenses.

Operational metrics show loan and deposit growth contributing to revenue expansion. The company reported sequential NII momentum in Q2 2025 and a Q2 NIM of 3.40%, according to Q2 commentary, which positions it above some regional medians and offers optionality if funding costs normalize with falling benchmark rates (Investing.com – Q2 2025 earnings call highlights. Management also cites a deposit beta near 72% since Q3 2024 — an operationally relevant metric because it quantifies how much deposit costs move with policy rates and thus how quickly NIM can respond to Fed cuts.

The question of execution is whether those investments produce the promised PPNR lift and ROTCE expansion before they weigh meaningfully on near-term margins. Historical expense growth (non-interest expense CAGR of 10.6% from 2019–2024) indicates prior investment activity; guidance for 2025 to keep adjusted expense growth flat to +2% will be a critical test of management’s ability to balance investment and efficiency.

Competitive Positioning and Relative Profitability#

Against regional peers, First Horizon’s revenue growth and PPNR metrics have been cited as above-average. Reported operating margins and PPNR-to-assets metrics indicate the bank is extracting meaningful yield from its franchise while investing selectively in growth. NIM at 3.40% (Q2 2025) and an operating margin near 20% in FY2024 place First Horizon in a competitive position within the regional banking cohort, though these advantages are sensitive to deposit pricing and CRE concentration risks.

A structural advantage is the bank’s exposure to higher‑yield specialty finance segments and a Southern U.S. footprint that has experienced above-average regional economic growth. Conversely, material exposure to commercial real estate (CRE) and the need to manage deposit pricing in a competitive market are persistent constraints. The combination of growth and capital returns has driven relative outperformance, but sustaining that advantage requires both credit stability and disciplined expense execution.

Risks, Reporting Discrepancies and What to Watch Next#

Key risks are familiar but consequential: CRE concentration, deposit funding pressure, and execution risk on expense and technology programs. More immediately, the accounting and reporting discrepancies embedded in the supplied dataset warrant careful investor diligence. Examples include differences between reported netDebt and our calculated net debt (we calculate -4.35B net cash at FY2024 vs. a reported netDebt entry of 2.15B in the dataset), and differences between balance-sheet cash figures and cashflow-end balances (the balance sheet lists cashAndCashEquivalents $2.44B for FY2024 while the cashflow table shows cashAtEndOfPeriod $1.54B). These variances may reflect timing, different line-item definitions, or data aggregation issues but must be reconciled with the company’s filings.

Near-term operational items to monitor include Q3/Q4 NIM trajectory as deposit beta evolves, quarterly net charge-off trends (FY2024 net charge-offs were modest in historical commentary), and management’s progress on the PPNR improvement target. Also crucial is a transparent reconciliation of reported leverage and liquidity metrics in the next 10‑Q/10‑K cycle so investors can be confident in the capital-returns runway.

What This Means For Investors#

First Horizon presents a classic trade-off: robust cash generation and a clear capital‑return policy versus compressed FY2024 net income and portfolio concentration risks. The company generates sizable free cash flow (FCF of $1.22B in FY2024) supporting dividends and repurchases, and management has articulated realistic operational targets (ROTCE >15%, PPNR uplift >$100MM). These elements explain why the market has re-rated the stock even though FY2024 net income declined.

However, the premium the market has paid is contingent on execution. If deposit costs remain elevated or CRE credit deteriorates, the same levers that have supported the rally can quickly reverse. Conversely, if management converts technology investment into the promised efficiency and NIM or NII benefits materialize with easing rates, the earnings trajectory could justify current multiples. Investors should therefore weigh the company’s strong cash-flow profile and capital-allocation discipline against the balance-sheet composition and the need for clearer leverage reconciliation.

Key Takeaways#

First, revenue growth is intact — FY2024 revenue increased +4.89% — even as GAAP net income fell -13.60% to $775MM, indicating margin and expense items pressured the bottom line. Second, cash generation is a strategic strength: free cash flow of $1.22B in FY2024 provides the fuel for dividends and repurchases. Third, liquidity and leverage metrics need reconciliation: our calculation shows net cash (‑$4.35B) using total debt and cash lines, which diverges materially from other reported net‑debt entries; investors should review the company’s reconciliations. Finally, execution will determine whether the stock’s premium is sustainable — success hinges on NIM dynamics, deposit-cost control, CRE performance and the conversion of technology spend into real efficiency gains.

Conclusion#

First Horizon’s share-price rally reflects investor confidence in management’s strategic plan — loan and deposit growth, targeted technology investment, and a disciplined capital‑return framework — rather than a simple read of FY2024 net income. The bank produces meaningful free cash flow and has articulated credible performance targets, but several data inconsistencies and structural risks (notably CRE concentration and deposit pricing) require transparent reconciliation and close monitoring.

For market participants, the central question is whether management can deliver the promised PPNR improvement and ROTCE expansion while preserving capital buffers. The financials show the building blocks exist, but the gap between operating profitability and GAAP net income this past fiscal year illustrates that execution and clarity — especially on leverage and liquidity reporting — will dictate whether the current valuation premium endures.

(Selected company figures referenced from First Horizon FY results and investor communications; see AlphaSpread – First Horizon investor relations and Q2 2025 earnings discussion (Investing.com.) *