A month has gone by since the last earnings report for Aflac Incorporated (AFL Quick QuoteAFL - Free Report) . Shares have added about 8.7% in that time period, outperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback?  Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Aflac (AFL Quick QuoteAFL - Free Report) Earnings Miss, Revenues Beat Estimates in Q4

Aflac Incorporated’s fourth-quarter 2016 operating earnings per share of $1.54 missed the Zacks Consensus Estimate of $1.64 by about 6.1% and also decreased 1.3% year over year. The downside was attributable to reserve adjustment of $.08 per diluted share compared with $1.56 in the last-year quarter. Aflac’s operating earnings per share for full-year 2016 were $6.79, up 10.4% year over year.

Total revenue increased 12% to $6.0 billion in the fourth quarter on a year over year basis. The top line also surpassed the Zacks Consensus Estimate of $5.8 billion. For 2016, total revenue grew 8.1% year over year to $22.6 billion.

In the fourth quarter, total acquisition and operating expenses increased 20.3% to $1.54 billion, while benefits and claims rose 11.4% to $3.3 billion, both on a year-over-year basis.

Detailed Analysis

Aflac Japan: Premium income inched up 2%, investment income decreased 7.6%, total revenue was down 1.1% in the fourth quarter, all on a year-over-year basis. Pre-tax operating profit margin decreased to 19.4% from 22.3% in the prior year.

Aflac U.S.: Premium income increased 2.2% to $1.4 billion in the fourth quarter. Net investment income was up 4.0% to $177 million. Total revenue increased 2.6% to $1.5 billion. Pre-tax operating earnings were $262 million, up 10.4% year over year.

Financial Update

As of Dec 31, 2016, total investment and cash increased 9.9% year over year to $116.4 billion. Shareholders’ equity was up 15.7% year over year to $20.5 billion.

Dividend Update

Aflac’s board of directors declared first-quarter 2017 cash dividend of $.43 per share, which is payable on Mar 1, 2017, to shareholders on record at the close of business on Feb 15, 2017

Share Repurchase Update

In the fourth quarter, Aflac bought back common shares worth $200 million. In 2016, it repurchased common shares worth $1.4 billion. At the end of Dec 2016, Aflac had 26.8 million of shares available for buyback under its share repurchase authorization.

2017 Guidance

Aflac expects to produce operating earnings per diluted share of $6.40 to $6.65.

Management anticipates that Aflac will repurchase shares worth $1.3–$1.5 billion in 2017.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to four lower. While looking back an additional 30 days, we can see even more downward momentum. There have been five downward revisions in the last two months.

Aflac Incorporated Price and Consensus

 

Aflac Incorporated Price and Consensus | Aflac Incorporated Quote

VGM Scores

At this time, Aflac Incorporated's stock has a poor Growth Score of 'F', however its Momentum is doing a bit better with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregte VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months