It has been about a month since the last earnings report for Aflac (
AFL Quick Quote AFL - Free Report) . Shares have added about 1.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aflac due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Aflac's Q2 Earnings Beat Estimates, Revenues Up Y/Y
Aflac second-quarter 2021 adjusted earnings per share of $1.59, which beat the Zacks Consensus Estimate by 25.2%. The bottom line improved 24.2% year over year.
The company’s results benefited from rising revenues, lower-than-expected benefit ratios and increased net investment income at the Aflac Japan segment. However, the segmental results were partly offset by drop in premiums across both the company’s segments. In the quarter under review, total revenues rose 2.9% year over year to $5.6 billion. The top line outpaced the consensus mark by 4.5%. Adjusted net investment income climbed 15.2% year over year to $983 million in the quarter. Annualized adjusted return on equity, excluding foreign currency impact, came in at 17%, reflecting 60 basis points (bps) improvement from the year-ago quarter. Total acquisition and operating expenses escalated 6.8% year over year to $1.5 billion in the second quarter. Aflac Japan
Total adjusted revenues of $3.8 billion fell 0.4% year over year in the segment primarily due to 5.4% plunge in premium income, partly mitigated by 25.1% growth in net investment income. Constrained sales due to the adverse impact of the COVID-19 pandemic coupled with limited-pay products attaining paid-up status dampened the segment’s premium growth.
Pre-tax adjusted earnings of the Japan segment climbed 19.7% year over year to $1 billion in the quarter, courtesy of improved net investment income and reduced third sector benefit ratio. Total new annualized premium sales of $124 million improved 38.4% year over year, driven by sale of the company’s new medical product and better pandemic conditions. Aflac U.S.
Total adjusted revenues dropped 1.8% from the prior-year quarter to $1.6 billion in the quarter due to reduced earned premium. Net premium income slipped 3.4% year over year to $1.4 billion as a result of constrained sales throughout 2020. Adjusted net investment income advanced 9.9% year over year to $189 million, courtesy of growth in variable net investment income.
The segment’s pre-tax adjusted earnings were $413 million, which decreased 3.1% year over year due to reduced earned premium and elevated costs. Sales of the segment surged 64.1% year over year to $264 million on the back of better pandemic conditions. Solid Financial Position (as of Jun 30, 2021)
Aflac exited the second quarter with total investments and cash of $146.7 billion, which increased 3.1% year over year.
As of Jun 30, 2021, total assets grew 2.8% year over year to $161.5 billion. Shareholders' equity (excluding AOCI) improved 13.2% year over year to $25.7 billion as of Jun 30, 2021. Share Repurchase & Dividend Update
In the second quarter, Aflac bought back 9.2 million shares worth $500 million. At June-end, the company had 76.5 million shares left under its buyback program.
The board of directors approved a third-quarter dividend of 33 cents per share. The dividend will be paid on Sep 1, 2021 to shareholders of record at the close of business as of Aug 18. Outlook for the Second Half of 2021 As the company witnessed sound sales growth across both the United States and Japan in the second quarter, management remains optimistic about improving sales conditions in the second half of 2021. Management expects Aflac cancer insurance sales to grow in the second half of this year on recommencement of proactive sales by Japan Post Group. How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
At this time, Aflac has a poor Growth Score of F, however its Momentum Score 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 quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Aflac has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.