Sun Life Financial Inc.’s (SLF - Free Report) stock is favored by investors, corroborated by its share price movement. The stock has surged nearly 33% in a year, outperforming its industry's increase of 3.5%. With a market capitalization of $25.7 billion, average volume of shares traded in the last three months were 0.6 million.
What’s Behind the Price Rally?
The company delivered a positive earnings surprise in three of the last four quarters with an average beat of 8.05%.
A solid performance across all its segments has been aiding Sun Life deliver an improved bottom line. Strong business growth plus improving premiums and deposits have been driving the company’s results.
Return on equity came in at 13.3% (rose 70 bps from 2017 end). Book value per share improved nearly 5% at first-quarter end from 2017-end level. Total debt to capital ratio improved 140 basis points from 2017-end level to 21.2% at first-quarter end within the company’s long-term target of 25%.
Sun Life is aggressively seeking to expand its international business. Evidently, it has intensified its focus on the Asian markets. The company boasts a strong presence in China, Philippines, India, Hong Kong and Indonesia. Contribution from Asian operations has significantly increased over the last few years. In fact, Sun Life announced its decision to align its international high net worth life insurance business with the Asia business group, thus aiming to solidify its business in Asia.
The Zacks Rank #3 (Hold) stock is trying hard to grow its Global Asset Management Business, which has been witnessing an increasing asset base for the past many quarters. Sun Life targets Sun Life Investment Management asset-under-management to the tune of $100 billion and a 20% operating margin by 2020.
The company has been effectively deploying capital and hiked its dividend thrice in 2017 and again 4% in May 2018. The board of directors also has an 11.5 million share buyback program, reflecting the company’s capital strength.
Re-designing of products, better pricing, focus on segments with higher growth, expanding asset management business and consolidating Asian operations will poise the company for long-term growth. Sun Life targets medium-term EPS growth between 8% and 10%, ROE of 12-14% and a dividend payout of 40-50%.
Sun Life carries a Zacks Rank #3 (Hold). The consensus mark for earnings and revenues translates into a year-over-year improvement for both 2018 and 2019. The company’s expected long-term earnings growth is 7%.
Stocks to Consider
Some better-ranked insurers are GWG Holdings, Inc (GWGH - Free Report) , American Equity Investment Life Holding Company (AEL - Free Report) and Kemper Corporation (KMPR - Free Report) .
GWG Holdings purchases life insurance policies in the secondary market in the United States. It came up with an average four-quarter beat of 195.14%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Equity Investment provides life insurance products and services in the United States. It pulled off an average four-quarter positive earnings surprise of 24.38%. The stock carries a Zacks Rank #2 (Buy).
Kemper provides property and casualty, and life and health insurance to individuals and businesses in the United States. It delivered an average four-quarter beat of 121.61%. The stock has a Zacks Rank of 1.
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