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Primerica (PRI) Gains 13% YTD: Can the Uptrend Continue?

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Primerica, Inc. (PRI - Free Report) shares have rallied 13.2% year to date against its industry's decrease of 23.9% and Zacks S&P 500 composite’s decline of 1.3%. With a market capitalization of $4.9 billion, average volume of shares traded in the past three months was 0.2 million.

What’s Behind the Upside?

The company delivered a positive earnings surprise of 3.76% in third-quarter 2018 while adjusted operating earnings per share grew 32% year over year. Moreover, the bottom line improved nearly 37% during the first nine months of 2018.

Revenues in Term Life Insurance increased 14% in the first nine months of 2018 and improved 16% in Investment and Savings Products. Total revenues improved 13% year over year, driven by incremental premiums on term life insurance policies.

The company continues to benefit from maximizing sales force growth and productivity, successfully catering to the demand of middle-income clients, expanding protection product offerings, increasing client investment options and developing digital capabilities. The company estimates sales force to grow in the mid-single-digit range in 2019. Net premiums increased 13.7% in the first nine months of 2018,

The company projects Term Life adjusted direct premiums to increase about 13.8% in 2018 and Term Life margins to hover around 18.8%.

Though the company expects Term Life issued policies to decrease 3.5% in 2018 but the same is expected to increase 3% year-over-year in 2019.

Adjusted return on equity (ROE), a measure of profitability, has been improving over the past many quarters. ROE of 23.7% in the third quarter expanded 200 bps and betters the industry average of nearly 9%. This reflects the company’s efficiency in utilizing its shareholders’ funds.

Banking on its operational efficiency and diverse cash flows, the life insurer returned $167.3 million through the first nine months of 2018. The company intends to repurchase about $200 million shares in 2018 and more than $200 million in 2019. Cash from operations surged nearly 36% through the first nine months of 2018.

Other Noteworthy Factors

Primerica carries a Zacks Rank #2 (Buy). With optimism surrounding the stock’s healthy performance, the Zacks Consensus Estimate for 2018 has been revised 0.7% upward in the past 30 days.

The Zacks Consensus Estimate for earnings translates to year-over-year growth of 30.9% on 12.7% higher revenues for 2018. For 2019, the bottom line is projected to increase 12.8% while the top line is estimated to rise 9.5%.

Primerica belongs to the Zacks Life Insurance industry, which is currently in the top 13% of the Zacks Industry Rank.

The stock carries a favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three factors. Backtested results have shown that stocks with an impressive VGM Score of A or B coupled with a bullish Zacks Rank of 1 and 2 are best investment options on offer.

Other Stocks to Consider

Investors interested in life insurance industry can also check out some other top-ranked stocks like Athene Holding Ltd. (ATH - Free Report) , Reinsurance Group of America, Incorporated (RGA - Free Report) and Torchmark Corporation (TMK - Free Report) .

Athene Holding, a retirement services company, issues, reinsures and acquires retirement savings products in the United States, the District of Columbia and Germany. The company delivered a 14.71% positive surprise in the last reported quarter and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Reinsurance Group of America offers individual and group life and health insurance products. The company delivered a 25.55% positive surprise in the earlier reported quarter. It carries a Zacks Rank #2.

Torchmark provides various life and health insurance products and annuities in the United States, Canada and New Zealand. It came up with a 4.61% positive surprise in the last reported quarter. It carries a Zacks Rank #2.

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