On Dec 5, we reiterated our recommendation on
) at Neutral based on its expense management and stable core
capital strength, paving way for expanded capital deployment.
However, consistent weakness in Japan raises operational
Why the Retention?
Estimates for Aflac have witnessed minor corrections since the
company reported its third-quarter 2013 results on Oct 29. The
company's earnings and revenues of $1.47 per share and $5.89
billion, respectively, were in line with the Zacks Consensus
However, the top and bottom line lagged the year-ago results,
owing to decelerated sales from WAYS products along with a weak
average yen and investment income in Japan. The sluggishness in
the U.S. market also limited growth in new sales.Conversely,
total acquisition, operating, benefits and claim expenses
decreased from the prior-year quarter.
Following the release of the third-quarter results, the Zacks
Consensus Estimate for 2013 inched down 0.3% to $6.18 per share
in the last 60 days. Moreover, the estimates for 2014 fell 2.3%
to $6.39 per share during the same period. On a year-over-year
basis, earnings are projected to decrease 6.4% in 2013 but
nominally grow by 3.5% in 2014.
Overall, with the Zacks Consensus Estimate for both 2013 and
2014 showing no clear directional pressure on the stock in the
near term, the company now has a Zacks Rank #3 (Hold).
Aflac's growth is sustained by its modest earnings guidance,
healthy capital ratios and stable ratings. Incremental share
buybacks and the latest dividend hike also instil confidence in
investors. Nonetheless, intense global competition coupled with
sluggish interest rate environment and currency fluctuations
deter the desired upside in the stock.
Overall, Aflac's investment restructuring, new product
introduction and the Japan Post agreement should help it gather
momentum in the long run, negate interest and currency risks and
provide more profitable investment opportunities. Management
expects earnings growth to rebound 2015 onwards.
Other Financial Stocks That Warrant a Look
While we remain on the periphery in the near term for Aflac,
better-ranked stocks in the financial sector include
Employers Holdings Inc.
Euronet Worldwide Inc.
FleetCor Tech Inc.
). All these stocks sport a Zacks Rank #1 (Strong Buy).
AFLAC INC (AFL): Free Stock Analysis Report
EURONET WORLDWD (EEFT): Free Stock Analysis
EMPLOYERS HLDGS (EIG): Free Stock Analysis
FLEETCOR TECH (FLT): Free Stock Analysis
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