On Jan 8, we reiterated our recommendation on MetLife Inc. ( MET ) at Neutral based on its stable growth in core fundamental and sturdy capital. However, intense competition, higher expenses and declining investment returns augment the operational risks.
Why the Retention?
Estimates for MetLife have moderated since the company reported its third-quarter 2013 results on Oct 30. The company's earnings per share of $1.34 missed the Zacks Consensus Estimate by 2 cents, although revenues of $16.9 billion surpassed the same benchmark by 0.5%.
However, the top and bottom line exceeded the year-ago results by 2% and 1.5%, respectively, based on moderate growth in premiums and fee revenues along with controlled operating expenses. However, higher investment and derivative losses deteriorated the return on equity (ROE) and book value per share.
Following the release of the third-quarter results, the Zacks Consensus Estimate for fiscal 2013 slipped 0.9% to $5.57 in the last 60 days. Moreover, estimates for 2014 are pegged at $5.68 per share, down 1.2% over the same period. Nonetheless, on a year-over-year basis, earnings are projected to grow 5.5% in 2013 and 2.0% in 2014.
Overall, with the Zacks Consensus Estimate for both fiscal 2014 and 2015 showing no clear directional pressure on the stock in the near term, the company now has a Zacks Rank #3 (Hold).
Detailing its near-term outlook, MetLife anticipates total annual revenue and earnings growth within 4-7% and 6-8%, respectively, through 2016. Meanwhile, management reaffirmed its long-term ROE growth goal of 12-14%.
However, the guidance takes into account the challenges from regulations and litigations as well as persistent low interest rates and declining variable annuities that may continue to remain weak in 2014. Nonetheless, operations from Southeast Asia, Latin America and other emerging markets as well as that from the U.S. are expected to drive growth going ahead.
Other Financial Stocks That Warrant a Look
While we maintain a neutral stance on MetLife in the near term, some better-ranked insurers include American International Group Inc. ( AIG ), Cigna Corp. ( CI ) and Kemper Corp. ( KMPR ). All these stocks sport a Zacks Rank #1 (Strong Buy).AMER INTL GRP (AIG): Free Stock Analysis ReportCIGNA CORP (CI): Free Stock Analysis ReportKEMPER CORP (KMPR): Free Stock Analysis ReportMETLIFE INC (MET): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research