On May 29, Zacks Investment Research downgraded
American Equity Investment Life Holding Co.
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
American Equity Investment has witnessed sharp downward estimate
revisions after reporting dismal first-quarter 2014 results. Shares
of this life insurer have also been on a downtrend following a weak
On Apr 30, American Equity Investment reported first-quarter
earnings per share of 48 cents, missing the year-ago earnings by a
cent, though in line with the Zacks Consensus Estimate. The company
reported a loss of 13 cents per share in the first quarter,
comparing unfavorably with 38 cents earned in the prior-year
The Zacks Consensus Estimate thus witnessed downward revisions for
2014 and 2015. It declined 4.4% to $1.97 for 2014 as three out of
four estimates moved south in the last 30 days and decreased 9.6%
year over year. For 2015, the Zacks Consensus Estimate slumped 8.5%
to $2.25 as all the estimates were revised lower.
The top line witnessed a sharp fall of 40.2% to $445 5 million due
to lower premiums and other considerations that dropped 44% year
Interest expense increased 43% due to the issuance of $400 million
notes. The interest coverage ratio of 1.86 compares unfavorably
with the industry average of 21.83.
While cash from operations in the reported quarter plunged 87% year
over year, cash balance at quarter end dropped 24% from the
Other Stocks to Consider
Though we prefer to avoid American Equity at present, life insurers
worth considering include
Lincoln National Corp.
Protective Life Corp.
Sun Life Financial Inc.
). All these carry a Zacks Rank #2 (Buy).
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AMER EQUITY INV (AEL): Free Stock Analysis
LINCOLN NATL-IN (LNC): Free Stock Analysis
PROTECTIVE LIFE (PL): Free Stock Analysis
SUN LIFE FINL (SLF): Free Stock Analysis Report
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