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Aflac (AFL) Rises 27.1% in 6 Months: More Growth in Store?
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Aflac Incorporated (AFL - Free Report) shares have jumped 27.1% in the past six months compared with the 23% rise of the industry it belongs to, owing to the growing demand for supplemental health and life insurance products. With the ongoing inflation making out-of-pocket expenses more costly, people are depending more on products provided by companies like Aflac.
Based in Columbus, GA, Aflac is one of the largest health care plan providers in the United States. It also has operations in Japan. AFL has a market cap of $64.3 billion.
Can It Retain Momentum?
The answer is yes and before we get into the details, let us show you how its estimates for 2022 stand.
The Zacks Consensus Estimate for Aflac’s 2022 earnings is pegged at $5.25 per share. Even though the 2022 estimate indicates a decline from the 2021 level of $5.94 per share, the metric is expected to turn around next year to $5.37 per share. The company beat earnings estimates in each of the last four quarters, with an average of 4.8%.
The consensus estimate for 2022 revenues is pegged at $19.2 billion, indicating a 13.4% decline from the 2021 reported level. Further, the Zacks Consensus Estimate for 2023 revenues is pegged at $17.9 billion. The decline in revenues is not expected to drag the bottom line primarily due to increased efficiency in operations. With improved sales in Japan, the top line is expected to improve in the future.
Now let’s delve into what might drive this Zacks Rank #3 (Hold) stock.
The company’s U.S. operations are targeting $1.8 billion in sales for 2025, with pre-tax profit margins reaching 17-20%. With strategic acquisitions, the company is expected to scale its business, going forward. It is leading the Worksite Supplemental Health market with a 29% market share. The company is expected to leverage its product portfolio and multichannel distribution to capture more market share.
Investments in technology and innovations are likely to boost its digital footprint, drive efficiency and position it for long-term growth. In a recent analyst briefing, the company stated that of the 156 million U.S. working population, 7.2 million have Aflac products, leaving a massive growth opportunity.
The Japan segment is expected to gain from productivity improvements at Japan Post Group. Its VISION 2024 strategy execution in the segment is likely to enhance coverage, launch products, become more competitive and address the needs of SME employees. It is targeting ¥80 billion in sales in 2025, with pre-tax profit margins reaching 26-28%.
The company recently announced a dividend hike, reflecting its confidence in the stability of the base business, long-term prospects and solid financial position. Growth investments and productivity gains are expected to drive its results. It intends to enhance utilization and focus on the unserved market to expand its footprint.
Aflac has a robust alternative investment portfolio. It resorts to interest rate hedging to protect its income and currency hedging to churn out capital and cost efficiency.
Risks
Despite the upside potential, there are a few factors that might hold back the stock’s growth. Declining cash flows can affect its future operations. Its net cash from operations declined 31.9% year over year in the first nine months of 2022. Also, its forward 12-month price-to-earnings ratio of 13.2X is higher than the industry average of 11.9X, marking it overvalued. Nevertheless, we believe that a systematic and strategic plan of action will drive the company’s long-term growth.
Headquartered in Milwaukee, WI, MGIC Investment provides private mortgage insurance and other products in the domestic markets and internationally. The Zacks Consensus Estimate for MTG’s current-year earnings indicates a 49.7% increase from the prior-year reported number.
Based in Chattanooga, TN, Unum is a financial protection benefit solutions provider. The Zacks Consensus Estimate for UNM’s 2022 bottom line indicates a 43.5% improvement from that reported a year ago.
Based in San Francisco, NerdWallet is a digital platform operator, connecting individuals and businesses with financial products suppliers. The Zacks Consensus Estimate for NRDS’ 2022 earnings signals a 78.1% improvement from that reported a year ago.
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Aflac (AFL) Rises 27.1% in 6 Months: More Growth in Store?
Aflac Incorporated (AFL - Free Report) shares have jumped 27.1% in the past six months compared with the 23% rise of the industry it belongs to, owing to the growing demand for supplemental health and life insurance products. With the ongoing inflation making out-of-pocket expenses more costly, people are depending more on products provided by companies like Aflac.
Based in Columbus, GA, Aflac is one of the largest health care plan providers in the United States. It also has operations in Japan. AFL has a market cap of $64.3 billion.
Can It Retain Momentum?
The answer is yes and before we get into the details, let us show you how its estimates for 2022 stand.
The Zacks Consensus Estimate for Aflac’s 2022 earnings is pegged at $5.25 per share. Even though the 2022 estimate indicates a decline from the 2021 level of $5.94 per share, the metric is expected to turn around next year to $5.37 per share. The company beat earnings estimates in each of the last four quarters, with an average of 4.8%.
Aflac Incorporated Price and EPS Surprise
Aflac Incorporated price-eps-surprise | Aflac Incorporated Quote
The consensus estimate for 2022 revenues is pegged at $19.2 billion, indicating a 13.4% decline from the 2021 reported level. Further, the Zacks Consensus Estimate for 2023 revenues is pegged at $17.9 billion. The decline in revenues is not expected to drag the bottom line primarily due to increased efficiency in operations. With improved sales in Japan, the top line is expected to improve in the future.
Now let’s delve into what might drive this Zacks Rank #3 (Hold) stock.
The company’s U.S. operations are targeting $1.8 billion in sales for 2025, with pre-tax profit margins reaching 17-20%. With strategic acquisitions, the company is expected to scale its business, going forward. It is leading the Worksite Supplemental Health market with a 29% market share. The company is expected to leverage its product portfolio and multichannel distribution to capture more market share.
Investments in technology and innovations are likely to boost its digital footprint, drive efficiency and position it for long-term growth. In a recent analyst briefing, the company stated that of the 156 million U.S. working population, 7.2 million have Aflac products, leaving a massive growth opportunity.
The Japan segment is expected to gain from productivity improvements at Japan Post Group. Its VISION 2024 strategy execution in the segment is likely to enhance coverage, launch products, become more competitive and address the needs of SME employees. It is targeting ¥80 billion in sales in 2025, with pre-tax profit margins reaching 26-28%.
The company recently announced a dividend hike, reflecting its confidence in the stability of the base business, long-term prospects and solid financial position. Growth investments and productivity gains are expected to drive its results. It intends to enhance utilization and focus on the unserved market to expand its footprint.
Aflac has a robust alternative investment portfolio. It resorts to interest rate hedging to protect its income and currency hedging to churn out capital and cost efficiency.
Risks
Despite the upside potential, there are a few factors that might hold back the stock’s growth. Declining cash flows can affect its future operations. Its net cash from operations declined 31.9% year over year in the first nine months of 2022. Also, its forward 12-month price-to-earnings ratio of 13.2X is higher than the industry average of 11.9X, marking it overvalued. Nevertheless, we believe that a systematic and strategic plan of action will drive the company’s long-term growth.
Key Picks
Some better-ranked stocks in the broader finance space are MGIC Investment Corporation (MTG - Free Report) , Unum Group (UNM - Free Report) and NerdWallet, Inc. (NRDS - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Headquartered in Milwaukee, WI, MGIC Investment provides private mortgage insurance and other products in the domestic markets and internationally. The Zacks Consensus Estimate for MTG’s current-year earnings indicates a 49.7% increase from the prior-year reported number.
Based in Chattanooga, TN, Unum is a financial protection benefit solutions provider. The Zacks Consensus Estimate for UNM’s 2022 bottom line indicates a 43.5% improvement from that reported a year ago.
Based in San Francisco, NerdWallet is a digital platform operator, connecting individuals and businesses with financial products suppliers. The Zacks Consensus Estimate for NRDS’ 2022 earnings signals a 78.1% improvement from that reported a year ago.