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Aflac (AFL) Rises 28% in a Year: More Room for Growth Ahead?
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Aflac Incorporated (AFL - Free Report) shares have jumped 28% in the past year, outpacing the 22.7% rise of the industry it belongs to, thanks to its strong value-creating abilities and the growing demand for its products. Its long-term growth potential is intriguing at the moment.
Based in Columbus, GA, Aflac is one of the leading health and life insurance providers in the United States. It also has operations in Japan. It has a market cap of $41.5 billion. In the past year, the company’s shares have outperformed the 14.6% growth in the S&P 500 Index and the 6.2% rise of the finance sector.
Image Source: Zacks Investment Research
Can it Retain Momentum?
The answer is yes and before we get into the details, let us show you where its estimates for the full-year 2023 stand.
The Zacks Consensus Estimate for Aflac’s 2023 earnings is pegged at $5.81 per share, indicating a 9% increase from the 2022 level. The company beat earnings estimates in all the last four quarters, with an average of 8.2%.
The consensus estimate for 2023 revenues stands at $18.3 billion, indicating a 6.2% decline from the 2022 level. Rising profits despite lower revenues indicate growing margins and efficiency in operations.
Now let’s delve into what might drive this Zacks Rank #3 (Hold) stock.
The company’s cost-saving initiatives are helping it to reduce expenses. Our estimate for total benefits and expenses in 2023 indicates a 7% year-over-year decrease. This is likely to boost its margins. As the high inflation environment makes out-of-pocket expenses more costly, people are depending more on products provided by companies like Aflac.
The growing demand for supplemental health and life insurance products is beneficial for the company. Its supplemental health products can reduce its bottom-line sensitivity to interest rate changes. This will provide the company with stability despite the ongoing economic volatility.
AFL is expected to leverage its product portfolio and multichannel distribution to capture more market share. The improving sales figures are major positives. In the first quarter, Aflac’s U.S. sales of $315 million grew 5.3% year over year. Also, new annualized premium sales in Japan of $100 million improved 10.8% year over year in the March quarter.
Aflac’s investments in technology and innovations are likely to boost its digital footprint, which will present a massive growth opportunity, drive efficiency and position it for long-term growth. Its confidence in the stability of the base business enables it to take shareholder-value boosting efforts. In the first quarter alone, AFL bought back 10.3 million shares worth $700 million. It had 106.3 million shares left for buyback at the first-quarter end.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on. Its free cash flow declined 14.2% in the trailing 12-month period. If this continues, AFL’s future operations will be affected. Also, its trailing 12-month price-to-book ratio of 2.12X is higher than the industry average of 1.7X, marking it overvalued. Nevertheless, we believe that a systematic and strategic plan of action will drive the company’s long-term growth.
The Zacks Consensus Estimate for AMERISAFE’s 2023 earnings has improved 11.5% over the past 60 days. AMSF beat earnings estimates in all the last four quarters, with an average of 24%.
The Zacks Consensus Estimate for Employers Holdings’ 2023 earnings indicates 6.8% year-over-year growth. EIG beat earnings estimates in each of the last four quarters, with an average of 35.6%.
The Zacks Consensus Estimate for Lemonade’s 2023 earnings suggests 15.9% year-over-year growth. Also, the consensus mark for LMND’s 2023 revenues implies a 53.6% year-over-year surge.
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Aflac (AFL) Rises 28% in a Year: More Room for Growth Ahead?
Aflac Incorporated (AFL - Free Report) shares have jumped 28% in the past year, outpacing the 22.7% rise of the industry it belongs to, thanks to its strong value-creating abilities and the growing demand for its products. Its long-term growth potential is intriguing at the moment.
Based in Columbus, GA, Aflac is one of the leading health and life insurance providers in the United States. It also has operations in Japan. It has a market cap of $41.5 billion. In the past year, the company’s shares have outperformed the 14.6% growth in the S&P 500 Index and the 6.2% rise of the finance sector.
Image Source: Zacks Investment Research
Can it Retain Momentum?
The answer is yes and before we get into the details, let us show you where its estimates for the full-year 2023 stand.
The Zacks Consensus Estimate for Aflac’s 2023 earnings is pegged at $5.81 per share, indicating a 9% increase from the 2022 level. The company beat earnings estimates in all the last four quarters, with an average of 8.2%.
The consensus estimate for 2023 revenues stands at $18.3 billion, indicating a 6.2% decline from the 2022 level. Rising profits despite lower revenues indicate growing margins and efficiency in operations.
Now let’s delve into what might drive this Zacks Rank #3 (Hold) stock.
The company’s cost-saving initiatives are helping it to reduce expenses. Our estimate for total benefits and expenses in 2023 indicates a 7% year-over-year decrease. This is likely to boost its margins. As the high inflation environment makes out-of-pocket expenses more costly, people are depending more on products provided by companies like Aflac.
The growing demand for supplemental health and life insurance products is beneficial for the company. Its supplemental health products can reduce its bottom-line sensitivity to interest rate changes. This will provide the company with stability despite the ongoing economic volatility.
AFL is expected to leverage its product portfolio and multichannel distribution to capture more market share. The improving sales figures are major positives. In the first quarter, Aflac’s U.S. sales of $315 million grew 5.3% year over year. Also, new annualized premium sales in Japan of $100 million improved 10.8% year over year in the March quarter.
Aflac’s investments in technology and innovations are likely to boost its digital footprint, which will present a massive growth opportunity, drive efficiency and position it for long-term growth. Its confidence in the stability of the base business enables it to take shareholder-value boosting efforts. In the first quarter alone, AFL bought back 10.3 million shares worth $700 million. It had 106.3 million shares left for buyback at the first-quarter end.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on. Its free cash flow declined 14.2% in the trailing 12-month period. If this continues, AFL’s future operations will be affected. Also, its trailing 12-month price-to-book ratio of 2.12X is higher than the industry average of 1.7X, 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 AMERISAFE, Inc. (AMSF - Free Report) , Employers Holdings, Inc. (EIG - Free Report) and Lemonade, Inc. (LMND - 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.
The Zacks Consensus Estimate for AMERISAFE’s 2023 earnings has improved 11.5% over the past 60 days. AMSF beat earnings estimates in all the last four quarters, with an average of 24%.
The Zacks Consensus Estimate for Employers Holdings’ 2023 earnings indicates 6.8% year-over-year growth. EIG beat earnings estimates in each of the last four quarters, with an average of 35.6%.
The Zacks Consensus Estimate for Lemonade’s 2023 earnings suggests 15.9% year-over-year growth. Also, the consensus mark for LMND’s 2023 revenues implies a 53.6% year-over-year surge.