Adjusted MFC Target

Zacks insurance sector analyst Eric Rothmann is restating his Hold rating on Manulife Financial Corporation (MFC - Analyst Report), in an update which came out today on the company though he did adjust the target price slightly. We excerpted the following details:

"Results of 3Q07 were slightly ahead of our expectations. Earnings benefited from in-force business growth and strong investment gains, were partially offset by the impact of declining interest rates. Despite intensifying competition, Manulife continues to generate strong growth in its business by expanding its products and international franchise.

"MFC’s current valuation is steep, which reflects its superior profitability relative to peers. Even though we believe EPS growth trends will continue to fuel upside potential of the stock, given current valuation, we think the shares are fairly-valued. Thus, our Hold rating remains as we adjust our six-month price target slightly to $42.70 per share.

"We have adjusted our FY07 and FY08 earnings expectations to incorporate 3Q07 results. Manulife currently trades at 16.2x our 2007 earnings estimate of $2.53 per share and 2.64x its 3Q07 book value of $15.54 per share, both of which are at substantial premiums to the industry median multiples. Considering Manulife’s diversified business mix, leading position in most of its markets, strong business growth, improvements to its expense position, expansion of products and locales, and superior profitability relative to its peers, we think the current steep valuation is relatively justifiable.

"Our six-month price target of $42.70 per share (down $0.80 per share from $43.50 per share previously), reflects a 2.55x price-to-book value multiple of our book value estimate of $16.75 per share at March 31, 2008, which implies a return of 6.5% from the current stock price (4% price appreciation + 2.5% dividend yield). Even though we believe better-than-peer earnings growth will result in additional upside in the stock, given current valuation level, we are maintaining our Hold rating on the shares of Manulife."

Read the full analyst report on MFC.

Read the full analyst report on MFC