Estimates for MetLife, Inc. (MET - Free Report) have been revised upward over the past 30 days, reflecting analysts' optimism on the stock. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings move 1.3% and 0.4% north, respectively, over the same time frame.
The company also has an impressive Value Score of A and a Zacks Rank #2 (Buy). Our research shows that stocks with a solid Value Style Score of A or B when combined with a top Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investment space.
Now, let’s focus on some important factors that make the company an investor favorite.
Revenue Growth: The company’s revenues are up by 11% year over year in the first nine months of 2018, mainly on the back of sales growth in Asia and EMEA, rise in operating premiums, fees and other revenues in its Group Benefits segment and an increase in net investment income owing to rising interest rates. Last year, the metric increased 3%. Given the company’s core fundamentals and its strong performing segments, the bottom line is expected to improve going forward.
Business Streamlining: MetLife has been constantly putting in efforts over the past few years to restructure its business for focusing on its core businesses, which have potential. A very significant step taken in this direction was the company’s recently completed separation of its U.S. Retail business named BrightHouse Financial. This business required MetLife to hold a huge capital buffer at its disposal. The move in turn, freed MetLife from a capital-intensive business. It also saved the company from exposure to interest rate and equity market volatility related to the exited business.
Moreover, the company closed its UK Wealth Management business, which was suffering low interest rates. The company also sold MetLife Afore, S.A. de C.V., its pension fund management business in Mexico. Though these divested businesses will dent top-line growth to some extent in the form of fees and premium lost, over the long term, such strategic steps will transform MetLife into a company with less instability and more free cash flow, which should lead to higher return on equity.
Strong Capital Management: The company boasts a strong risk-based capital position, sufficient liquidity and a low debt ratio. It is also managing its capital efficiently, evident from its return on Equity (ROE) of 9.76%, higher than the industry’s average of 7.7%. It has been buying back shares, which is aiding its bottom line. Recently, the company announced an additional $2-billion of share repurchases, bringing its current authorized buyback capacity to almost $2.5 billion. Over the three-year period from 2016 through 2018, MetLife will return close to $12 billion to its shareholders through share repurchases and common dividends. During the same timeframe, its share count will be down by more than 10%.
Positive Earnings Surprise History: The company’s surprise history shows that its earnings beat estimates in the trailing four reported quarters, the average positive surprise being 9.67%.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $5.35, representing a year-over-year increase of 18.89% on 2.9% higher revenues of $68.96 billion.
Long-term earnings growth rate is pegged at 12.6%, higher than the industry’s average of 8.1%, which remains a positive for the company.
Undervalued: Its valuation looks attractive at the current level. The company has a forward 12-month P/B ratio of 0.86, significantly lower than the industry average of 2.29.
Shares of the company have lost 15.5% versus its industry’s growth of 0.7%. This provides an attractive entry point to own the stock.
Other Stocks to Consider
Investors interested in the insurance-multiline industry might also take a look at a few other top-ranked stocks like Cigna Corporation (CI - Free Report) , MGIC Investment Corporation (MTG - Free Report) and Old Republic International Corporation (ORI - Free Report) .
Cigna provides insurance and related products and services in the United States and internationally. The company sports a Zacks Rank #1 (Strong Buy) and delivered average four-quarter beat of 13.46%. You can seethe complete list of today’s Zacks #1 Rank stocks here.
MGIC Investment Corporation offers private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. It came up with average four-quarter positive surprise of 34.32%. The company carries a Zacks Rank of 2.
Old Republic engages in the insurance underwriting and related services business, primarily in the United States and Canada. The company managed to pull off average trailing four-quarter earnings surprise of 15.66% and is a Zacks #2 Ranked player.
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