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Manulife (MFC) Up 86% in a Year: Will the Rally Continue?

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Manulife Financial Corporation (MFC - Free Report) shares have gained 86.4% in a year compared with the industry's increase of 45.8% and the Finance sector’s increase of 53.7%. The Zacks S&P 500 composite has risen 59.8% in the said time frame. With market capitalization of $41.6 billion, average volume of shares traded in the last three months was 3.1 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 three reported quarters.

Return on equity of 11% 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 and 2022 earnings has moved up 1.3% and 1.9% respectively in the past 30 days, reflecting analysts’ optimism. The consensus estimate indicates year-over-year increase of 16.6% and 9.8%. Manulife Financial targets core EPS growth between 10% and 12% over the medium term. The expected long-term earnings growth rate is pegged at 10%.

Manulife remains focused on expanding in Asia, the major contributor to the company’s earnings. In-force business growth in Asia and favorable product mix should continue to drive its earnings.

Manulife’s Wealth and Asset Management (WAM) business continued to witness core earnings growth. While it already boasts a solid presence in North America and Asia, Manulife Asset Management has identified Europe (and the wider EMEA market) as a significant growth area.  The company thus has been make 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.  

This Zacks Rank #3 (Hold) life insurer boasts a strong capital position. While the company had $29 billion of capital above the supervisory target, LICAT ratio improved 900 bps. In 2020, the company released $780 million in capital through portfolio optimization and targets to free up $5 billion in capital by 2022. Also, it targets leverage ratio of 25 over the medium term.   

Moreover, the company has increased its dividend at four-year CAGR of nearly 11%. Its current dividend yield of 3.9% is higher than the industry average of 3 %, which makes the stock an attractive pick for yield-seeking investors. The company targets 30-40% dividend payout over the medium term.

The stock carries an impressive VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

The Zacks Consensus Estimate for 2021 and 2022 has moved up 3% and 1.9% in the past 30 days, reflecting analysts’ optimism.

Stocks to Consider

Some better-ranked stocks are Old Republic International Corporation (ORI - Free Report) , Athene Holding , and Sun Life Financial (RDN - Free Report) .    

Old Republic International delivered an earnings surprise of 87.50% in the last reported quarter. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank.

Athene delivered an earnings surprise of 31.94% in the last reported quarter. It carries a Zacks Rank #2 (Buy).

Sun Life Financial delivered an earnings surprise of 17.71% in the last reported quarter. It carries a Zacks Rank #2.

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