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Hartford Financial (HIG) Up 42.5% in Past Year: More Room Left?

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The Hartford Financial Services Group, Inc.’s (HIG - Free Report) shares have jumped 42.5% in the past year, outperforming the 4% growth of the industry, thanks to greater exposure, faster economy recovery and increased vaccinations. The company has not only managed to navigate through last year’s coronavirus-induced market volatility but also positioned itself for better returns in the future.

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Headquartered in Hartford, CT, Hartford Financial benefited from the expanded product offerings and capital appreciation. It is one of the major multi-line insurance and investment companies in the country, providing investment products, group life and group disability insurance, property and casualty insurance, and mutual funds in the United States. Its presence in the United Kingdom, continental Europe and other international regions bode well for the company’s business. It currently has a market cap of $23 billion.

Can It Retain Momentum?

The answer is yes and before we get into the details, let us show you how its estimates for 2021 stand. The Zacks Consensus Estimate for 2021 earnings per share currently stands at $5.69, signaling a 7.4% increase in the past 60 days. During this time period, the company has witnessed five upward estimate revisons compared to none in the opposite direction. HIG beat earnings estimates in three of the last four quarters and missed once, with an average of 34.9%.

Now let’s delve into what’s driving the Zacks Rank #3 (Hold) stock.

The company’s commitment to boost investment in energy transition will likely bring more environment-friendly energy investors onboard. Hartford Financial is expected to invest $2.5 billion in multiple sources that are advancing energy transition over the next five years. Betting for a future with sustainable energy bodes well for the company.

Hartford Financial took restructuring initiatives, on the back of which total benefits and expenses decreased 11.3% year over year in 2020. It took measures to cut costs by $540 million within 2022 and $625 million in 2023. Even though the same increased 19.5% year over year in the first nine months of 2021, we expect expenses to continue declining on the back of its strategic initiatives. This will give a boost to the bottom line.

HIG took a number of strategic initiatives to improve its risk profile from a number of well-executed strategic dispositions of legacy run-off businesses. Hartford Financial has been vending non-core businesses to concentrate on U.S. operations and enhance operating leverage. Apart from lowering expenses, boosting profitability and improving returns to shareholders, these divestitures are enhancing financial flexibility by freeing up more capital.

The company also has been putting in efforts to boost its portfolio through acquisitions. In 2019, HIG closed the buyout of Navigators Group, a specialty insurer, for a deal value of around $2.1 billion. The move helped it expand product offerings and geographic reach plus strengthen its commercial business lines. All these strategic initiatives poise the company well for long-term growth.

Also, its balance sheet strength will provide financial flexibility to navigate through volatile business periods. Its long-term debt to capitalization of 21.7% is lower than the industry average of 28.1%.

Risks

Despite the upside potential, there are a few factors that are impeding the stock’s growth lately. The Personal Lines unit has been generating loss due to higher auto liability loss over the last few years. In 2019 and 2020, earned premiums were down 5.9% and 6% year over year, respectively. For the first nine months of the year, earned premiums from the business dipped 1.5% year over year. Non-renewed premium surpassing new business in auto and homeowners is concerning for the segment. Nevertheless, we believe that a systematic and strategic plan of action will drive long-term growth.

Key Picks in Finance

Some better-ranked players in the Finance space include Alerus Financial Corporation (ALRS - Free Report) , Blackstone Inc. (BX - Free Report) and Houlihan Lokey, Inc. (HLI - Free Report) . While Alerus Financial and Blackstone sport a Zacks Rank #1 (Strong Buy), Houlihan Lokey has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Based in Grand Forks, ND, Alerus Financial provides numerous financial services to clients. Its financial strength is reflected by massive total assets of $3.2 billion at third quarter-end, which increased 5.4% for the first nine months of 2021. Rising investment securities will likely keep boosting ALRS’ asset position in the coming quarters.

Alerus Financial’s bottom line for 2021 is expected to jump 11.1% year over year to $2.80 per share. It has witnessed three upward estimate revisions in the past 60 days and no movement in the opposite direction. Alerus Financial beat earnings estimates thrice in the last four quarters and missed once, with an average surprise of 23.6%.

Headquartered in New York, Blackstone is well poised to benefit from its fund-raising ability, revenue mix and inorganic expansion strategies. The company’s fee-earning assets under management (AUM) and total AUM consistently demonstrate strong growth, aided by increasing net inflows. Over the last four years (2017-2020), fee-earning AUM has witnessed a CAGR of 11.9% and total AUM saw a CAGR of 12.5%.

Blackstone’s 2021 earnings are expected to rise 64.2% to $4.35 per share. It has witnessed five upward estimate revisions in the past 60 days compared with none in the opposite direction. BX beat earnings estimates in all the last four quarters, with an average of 23.7%.

Houlihan Lokey — headquartered in Los Angeles, CA — provides multiple financial services to clients all over the world. Its growing footprint in Europe and Asia’s investment banking services field will help HLI boost strategic and shareholder value in the coming days. Rising average transaction fees will help HLI increase corporate finance revenues.

The full-year 2022 bottom line of Houlihan Lokey is expected to rise 37.7% year over year to $6.36 per share. In the past 60 days, it has witnessed four upward estimate revisions and no downward movement. HLI beat earnings estimates in all the last four quarters, with an average of 39.5%.