Estimates for Torchmark Corporation TMK have been revised upward over the past 30 days, reflecting analysts' confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 bottom line being raised 0.7% to $6.07 and for 2019 earnings move 0.5% north to $6.53.
This provider of annuities, whole and term life insurance, accidental death insurance, health insurance, Medicare supplements and long-term healthcare policies carries a favorable Value Score
of A. Shares of this Zacks Rank #2 (Buy) insurer have gained 10.9% in a year against the industry
's 6.8% decline. Also, back tested results have shown that stocks with an impressive Value Score of A or B coupled with a bullish Zacks Rank #1 (Strong Buy) and (2) offer the best investment bets.
Torchmark's niche market focus, strong operating fundamentals and a steady capital deployment should continue to drive its earnings growth. For 2018, Torchmark expects net operating income between $6.02 and $6.12 per share.
Let's focus on the factors that make Torchmark a stock to retain for attractive returns.
Strong Performance at American Income : Torchmark's most important distribution channel -American Income Exclusive Agency - has been witnessing higher net sales, driven by an increased agent count. The company projects life sales growth between 4% and 8% in 2018. Also, expected producing agent count between 7,000 and 7,300 in 2018 should drive premiums higher.
Consistent Results at Global Life : Global Life operates in a relatively non-competitive market, selling basic life insurance products to middle and lower middle-income households and thus, staying beyond the purview of stiff competition. Focus on expanding margins rather than boosting sales or sales levels or margins as a percentage of premiums is bearing fruit. Torchmark estimates the underwriting margin to range between 15% and 17%.
Excess Investment Income : The company has been witnessing improved investment income since the third quarter of 2016, driven by a decline in the negative impact of the lengthy delays in receiving Part D reimbursements. In 2018, the company anticipates about 6% rise in excess investment income.
Effective Capital Management : Torchmark enjoys a solid cash flow, helping it intelligently deploy capital. The company has hiked its dividend at a four-year CAGR of 17.5% and presently yields 0.7%. It also bought back shares worth $195 million year to date. For 2018, Torchmark estimates free cash flow of about $325 million, thus widening scope for more capital deployment.
Growth Projections : The Zacks Consensus Estimate for current-year earnings per share is pegged at $6.07, representing year-over-year growth of 25.9% on 3.9% higher revenues of $4.3 billion. For 2019, the consensus mark for the bottom line stands at $6.53, translating into a 7.6% year-over-year rise while the same for the top line is projected at $4.5 billion, up 4.3%.
Torchmark has an expected long-term earnings per share growth rate of 13.2%.
Positive Earnings Surprise History : The company flaunts a stellar earnings surprise history, exceeding the Zacks Consensus Estimate in the last 10 quarters. This outperformance in turn, underlines the company's operational efficiency. The average seven-quarter positive earnings surprise is 1.74%.
Undervalued : Shares of Torchmark are trading at a price to book multiple of 1.8, much lower than the industry average of 3.5. Price to book value ratio is the best multiple for valuing life insurers because of large variations in their earnings results from one quarter to the next. This ratio essentially measures a life insurer's current market value relative to what it would be worth if it chooses to shut down. Underpriced shares with solid fundamentals are lucrative bets.
Other Stocks to Consider
Investors interested in the life insurance industry can also consider some other top-ranked stocks like Genworth Financial, Inc. GNW , American Equity Investment Life Holding Company AEL and Primerica, Inc. PRI .
Genworth Financial provides insurance and homeownership solutions in the United States and internationally. It pulled off an average four-quarter positive surprise of 63.32%. The stock sports a Zacks Rank #1 (Strong Buy) You can see the complete list of today's Zacks #1 Rank stocks here .
American Equity Investment provides life insurance products and services in the United States. The company came up with an average four-quarter earnings surprise of 22.24%. The stock carries a Zacks Rank #2 (Buy).
Primerica distributes financial products to middle income households in the United States and Canada. It delivered an average four-quarter beat of 5.89%. The stock carries a Zacks Rank of 2.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Primerica, Inc. (PRI): Free Stock Analysis Report Torchmark Corporation (TMK): Free Stock Analysis Report American Equity Investment Life Holding Company (AEL): Free Stock Analysis Report Genworth Financial, Inc. (GNW): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research