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Manulife (MFC) Up 33% in 6 Months: More Room for Upside?

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Manulife Financial Corporation (MFC - Free Report) shares have gained 32.5% in six months compared with the industry's increase of 19.3% and the Finance sector’s increase of 21.6%. The Zacks S&P 500 composite has risen 21% in the said time frame. With market capitalization of $33.9 billion, average volume of shares traded in the last three months was 2.6 million.

Strong Asia business, expanding wealth and asset management business and solid capital position are likely to drive Manulife Financial. The company beat earnings estimates in the last two reported quarters.

Return on equity of 11.1% in the trailing twelve months was better than the industry average of 10.8%, reflecting the company’s efficiency in utilizing shareholders’ fund.  Manulife aims more than 13% ROE in the medium term.

Will the Bull Run Continue?

The Zacks Consensus Estimate for 2021 earnings has moved up 4% in the past 60 days, reflecting analysts’ optimism. The consensus estimate indicates year-over-year increase of 12.5%.

The expected long-term earnings growth rate is pegged at 10%, better than the industry average of 9.5%. It aims core EPS growth between 10% and 12% over the medium term.

Being one of the three dominant life insurers within its domestic Canadian market, this Zacks Rank #2 (Buy) life insurer is continually strengthening its presence in the Asian market. Its Asia business is a major contributor to earnings.

The company has been expanding its Wealth and Asset Management business. Boasting a compelling presence in North America and Asia, it has identified Europe (and the wider EMEA market) as a significant growth area and making long-term investments in this region.

Manulife expects to lower costs, targeting an expense efficiency ratio of less than 50% or $1 billion in cost savings and avoidance by 2022.

The company has a robust balance sheet. It targets leverage ratio of 25 over the medium term and aims to free up $5 billion in capital by 2022, enhancing its financial flexibility.  

Manulife has increased its dividend at a six-year (2014-2020) CAGR of 8.2%, With a payout of about 40%, its dividend yield is 4.8%, higher than the industry average of 3.3%. The company targets 30-40% dividend payout over the medium term.

Other Stocks to Consider    

Investors interested in the same space can look at Sun Life Financial (SLF - Free Report) , Brighthouse Financial (BHF - Free Report) and Reinsurance Group of America (RGA - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sun Life delivered an earnings surprise of 20.00% in the last reported quarter.

Brighthouse Financial delivered an earnings surprise of 26.59% in the last reported quarter.

Reinsurance Group delivered an earnings surprise of 77.27% in the last reported quarter.

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