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Reasons Why Hold is an Apt Strategy for Manulife (MFC) Stock

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Manulife Financial Corporation’s (MFC - Free Report) strong Asia business, expanding wealth and asset management business, and solid capital position along with favorable growth estimates make it worthy of retention in one’s portfolio.

Zacks Rank & Price Performance

Manulife currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 9.3%, against the industry’s decrease of 0.8%.

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Growth Projections

The Zacks Consensus Estimate for 2021 earnings is pegged at $2.62, indicating an increase of 27.8% from the year-ago reported figure while that for 2022 is pegged at $2.79, indicating an upside of 6.6%  from the year-ago reported figure. The long-term earnings growth rate is currently pegged at 10%.

Manulife Financial targets core EPS growth between 10% and 12% over the medium term.

Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 13%, in line with the industry average, reflecting the company’s efficiency in utilizing shareholders’ fund.  The company targets 13% ROE over the medium term.

Earnings Surprise History

The life insurer has a decent track of delivering earnings surprise in the last five quarters, with the average beat being 12.34%.

Estimate Revision

The Zacks Consensus Estimate for 2021 and 2022 has moved 2.7% and 1.5% north in the past 30 days, reflecting analyst optimism.

Style Score

The company is well poised for progress, as is evident from its favorable 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.

Business Tailwinds

Manulife has been continually growing its Asia business that contributes significantly to its earnings. The company, one of the three dominant life insurers within its domestic Canadian market, has been expanding its distribution network and extending agreements with strategic partners to retain a stronghold over the Asian markets.

Already boasting a solid presence in North America and Asia, Manulife is consistently expanding its Wealth and Asset Management business. Manulife Asset Management has identified Europe (and the wider EMEA market) as a significant growth area and making long-term investments in this region.

To improve profitability, the company remains focused on managing costs prudently. It targeted an expense efficiency ratio of less than 50% or $1 billion in cost savings and avoidance by 2022.  While it has already achieved the costs savings target, it is on track to deliver an efficiency ratio of less than 50% by 2022.

Manulife focuses on expediting growth in the highest potential businesses and targets two-third of core earnings from these businesses.

Strong Capital Position

Manulife boasts a strong capital position. At second-quarter 2021 end, the company had $23 billion of capital above the supervisory target while the LICAT ratio was 137. It targets leverage ratio of 25 over the medium term.

Dividend History

Manulife has increased its dividend at a four-year CAGR of nearly 11%. Its current dividend yield of 4.6% is higher than the industry average of 3.3%. It targets 30-40% dividend payout over the medium term.

Stocks to Consider

Some better-ranked stocks from the insurance space include Athene Holding , Brighthouse Financial (BHF - Free Report) , and Lincoln National Corporation (LNC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Athene Holding delivered an earnings surprise of 48.24% in the last reported quarter.

Brighthouse Financial delivered an earnings surprise of 70.51% in the last reported quarter.

Lincoln National delivered an earnings surprise of 31.54% in the last reported quarter.



 


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