On Mar 12, we upgraded our recommendation on
) to Neutral based on its modest operating performance in 2012
and successful divestiture of the banking operations. However, a
faltering guidance for 2013 amid challenging interest rates and
competition raise caution.
Why the Upgrade?
MetLife's fourth-quarter 2012 operating earnings per share of
$1.25 modestly beat both the Zacks Consensus Estimate of $1.18
and the year-ago quarter's earnings of $1.17. The company has
outperformed estimates in all of the last four quarters, leading
to an average surprise of 5.0%.
Total operating revenue also increased 12% year over year to
$18.36 billion and also topped the Zacks Consensus Estimate of
$17.22 billion. Strong results were driven by higher net
investment income, premiums and fees.
However, following the fourth quarter release on Feb 13, the
estimates for MetLife did not witness any movement. Over the last
30 days,the Zacks Consensus Estimate for 2013 and 2014 remained
consistent at $5.24 per share and $5.64 a share, respectively.
With the Zacks Consensus Estimates 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).
MetLife's capital position remains one of the sturdiest in the
industry, cushioned by a diversified portfolio mix and a leading
brand, as reflected by its strong book value growth and healthy
ratings. Moreover, consistent focus on international growth and
the complete exit from the banking business should enhance
Nevertheless, the extended low interest rate environment,
intense competition, currency fluctuations and inflationary
pressure are likely to affect financials in the upcoming
quarters. These factors have also impelled management to estimate
earnings growth of (-3%) to 4% over 2012 in 2013 after posting
22% growth in 2012, thereby creating difficult comps going
Other Stocks to Consider
While MetLife is expected to be steady in the near term, other
stocks in the insurance sector that are outperforming include
CNO Financial Group Inc.
XL Group Plc
). All of these carry a Zacks Rank #1 (Strong Buy).
AEGON N V (AEG): Free Stock Analysis Report
CNO FINL GRP (CNO): Free Stock Analysis
METLIFE INC (MET): Free Stock Analysis Report
XL GROUP PLC (XL): Free Stock Analysis Report
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