Unlocking First Bancorp's Q2 Earnings Potential: Growth, Dividends, and Sentiment

As First Bancorp (NYSE: FBNC) prepares to report Q2 2025 earnings on July 23, investors are closely scrutinizing the company's ability to exceed consensus expectations. With a history of consistent earnings beats, a dividend yield of 2%, and growing institutional interest, the results could unlock significant upside for shareholders. This analysis evaluates the stock's earnings beat potential, dividend sustainability, and valuation dynamics, while considering the broader implications for future growth.

Earnings Beat Potential: A Track Record of Outperformance

First Bancorp has demonstrated resilience in meeting and surpassing analyst forecasts, a trend critical to sustaining investor confidence. For Q2 2025, consensus estimates project $0.89 EPS and $109.22 million in revenue, representing a modest sequential improvement from Q1's $0.84 EPS. Notably, the company has beaten EPS estimates in three of the last four quarters, including an 8.6% surprise in Q1 2025.

Recent analyst revisions provide further clues. The Zacks Earnings ESP model, which analyzes revisions in the 30 days before earnings, suggests a +3.45% positive deviation for First Bancorp, signaling a higher likelihood of an EPS beat. This contrasts with peers like First Horizon National Corp (FHN), which also exceeded expectations in Q2 despite a minor revenue miss, underscoring the primacy of EPS over revenue for stock performance.

Dividend Sustainability: A Steady Income Stream

With a dividend yield of 2% and a recent increase to $0.23 per quarter, First Bancorp offers income investors a compelling value proposition. The payout ratio of 23.3% (based on the $0.89 Q2 EPS estimate) leaves ample room for growth, provided earnings remain consistent. Historically, the company has prioritized capital returns, with a 7.6% year-over-year revenue growth in Q1 2025 supporting this strategy.

However, dividend sustainability hinges on maintaining profitability. A Q2 beat would reinforce the dividend's safety, while a miss could invite scrutiny over payout levels.

Institutional Sentiment: A Bullish Undercurrent

Institutional investors have been active buyers of First Bancorp shares. Holdings increased in Q1 2025, with Millennium Management, Jane Street, and UBS Asset Management boosting their stakes. While analysts maintain a Hold consensus (with a $49.33 price target), upgrades from firms like Stephens (to $50) and Wells Fargo (to “Overweight”) signal shifting sentiment.

This institutional support is critical. Historically, stocks with rising institutional ownership outperform peers when they exceed earnings expectations, as seen in FHN's 3.3% pre-market surge after its Q2 beat.

Valuation: A Discounted Opportunity?

First Bancorp trades at a forward PE of 21.8, below its five-year average of 24.1, suggesting undervaluation relative to its growth trajectory. Peer comparisons reveal further intrigue:

• Key competitors (e.g., First Horizon (FHN) and People's United (PBCT)) trade at PEs of 15.2 and 16.8, respectively.
• Price-to-book ratio: 1.4x, versus an industry average of 1.2x, reflecting its premium valuation for asset quality.

While not cheap on an absolute basis, the stock's 52-week trading range ($34.50–$50.34) and a beta of 0.87 (indicating lower volatility than the market) suggest it offers downside protection while positioning for upside.

Recent Estimate Revisions and Full-Year Outlook

Analysts have nudged Q2 2025 EPS estimates higher, with the consensus rising to $0.89 from $0.86 in early June. However, full-year 2025 estimates remain steady at $3.00 EPS, while 2026 projections hold at $3.00. This stability reflects cautious optimism, as revenue growth faces headwinds from a competitive banking landscape.

A strong Q2 beat could catalyze upward revisions, lifting the stock. Conversely, a miss would likely draw attention to slowing net interest margins or credit quality concerns, which remain manageable but are not without risks.

Implications and Investment Advice

First Bancorp's Q2 results are a pivotal moment. A beat would:
1. Boost confidence in its ability to sustain earnings amid macroeconomic uncertainty.
2. Trigger upward revisions, potentially pushing the stock toward its 52-week high of $50.34.
3. Reinforce dividend credibility, attracting income-focused investors.

Investors should consider:
- Buying ahead of the earnings release if technical indicators (e.g., RSI, moving averages) suggest upward momentum.
- A hold posture if estimates are met but not exceeded, given the stock's already reasonable valuation.
- Caution if results fall short, as downside could test the 50-day moving average of $42.80.

Conclusion: A Stock Worth Watching

First Bancorp's upcoming earnings offer a clear catalyst for investors. With a favorable EPS beat potential, sustainable dividends, and rising institutional interest, the stock is positioned to capitalize on positive results. While valuation is not overly discounted, the combination of consistent performance and strategic capital returns makes FBNC a compelling play for both growth and income investors. As the earnings date approaches, focus on whether the company can sustain its outperformance streak—a result that could redefine its trajectory in an increasingly competitive banking sector.