Manulife Financial Corporation’s MFC shares have gained 8.4% year to date, outperforming the industry’s increase of 4.5%. While the Finance sector has decreased 0.5%, the Zacks S&P 500 composite has risen 10.3% in the same period. With a market capitalization of $35.7 billion, the average volume of shares traded in the last three months was about 3.4 million.
Strong Asia business, expanding Wealth and Asset Management business and solid capital position continue to drive this Zacks Rank #2 (Buy) life insurer.
Manulife, one of the three dominant life insurers in Canada, has a decent history of delivering earnings surprises in three of the last four reported quarters while missing in one. Its earnings grew 6.2% in the last five years, better than the industry average of 2.6%.
Manulife’s ROE for the trailing 12 months was 12.8%, better than the industry average of 12.3%. This reflects Manulife’s efficiency in utilizing shareholders’ funds. It targets 13% ROE over the medium term.
Can It Retain the Bull Run?
The Zacks Consensus Estimate for 2023 earnings stands at $2.44, suggesting an increase of 2.5% on 7.8% higher revenues of $44.3 billion. The consensus estimate for 2024 earnings stands at $2.61, suggesting an increase of 5.3% on 0.5% higher revenues of $44.5 billion.
The long-term earnings growth rate is currently pegged at 10%. Manulife targets core EPS growth between 10% and 12% over the medium term.
Manulife’s Asia business contributes significantly to its earnings and thus it remains focused on expanding the same.
In its effort to expand the Wealth and Asset Management business, MFC has identified Europe (and the wider EMEA market) as a significant growth area and is making long-term investments in this region. The life insurer remains focused on accelerating growth in the highest potential businesses and targets two-thirds of core earnings from these businesses.
MFC has an impressive inorganic growth story with prudent use of capital in high-growth, less capital-intensive and higher-return businesses. A supportive capital position enables Manulife to ramp up its inorganic growth profile.
In sync with the industry trend, Manulife has invested more than $1 billion since 2018 to enhance its digital capabilities.
The life insurer’s sturdy capital position supports effective capital deployment. While it recently raised dividends by 11%, it continues to target a 35-45% dividend payout over the medium term. The life insurer also bought back $400 million worth of shares in the first quarter of 2023.
MFC targets a leverage ratio of 25% and a 30-40% dividend payout over the medium term.
The Zacks Consensus Estimate for MFC’s 2023 and 2024 earnings has moved 2.1% and 0.8% north, respectively, in the past 30 days, reflecting analysts’ optimism.
MFC’s shares are trading at a price-to-book value multiple of 1.15, lower than the industry average of 1.57. It has a favorable Value Score of A. Back-tested results have shown that stocks with a Value Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or #2, are the best investment opportunities.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are Reinsurance Group of America RGA, American Equity Investment Life Holding AEL and GoHealth GOCO.
Reinsurance Group’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, while missing in one. RGA sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RGA’s 2023 and 2024 earnings per share indicates year-over-year increases of 22.9% and 1.4%, respectively. Year to date, RGA shares have gained 5.7%.
American Equity’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters, while missing in one. AEL carries a Zacks Rank #2.
The Zacks Consensus Estimate for AEL’s 2023 and 2024 earnings per share indicates year-over-year increases of 60.8% and 8.6%, respectively. Year to date, AEL shares have lost 15.1%.
GoHealth’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters, while missing in the other two. GOCO carries a Zacks Rank #2.
The Zacks Consensus Estimate for GOCO’s 2023 and 2024 earnings per share indicates year-over-year increases of 73.1% and 12.2%, respectively. Year to date, GOCO’s shares have surged 88.9%.
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