Aflac Incorporated AFL is strategically positioned for growth, leveraging higher sales, cost-cutting initiatives and a robust domestic market presence. The expansion of its product suite adds further momentum. The significant floating rate income remains a key driver, fortifying its investment income.
Outperformer & Zacks Rank
Over the past year, shares of Aflac have rallied 16.3%, outperforming the industry’s 11.5% rise. Headquartered in Columbus, GA, AFL operates as a supplemental health and life insurance product provider. It has strong footprints in the United States and Japan. The company has a market cap of $49.5 billion.
Due to its solid prospects, this Zacks Rank #2 (Buy) stock is a compelling addition to investment portfolios at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for AFL’s current-year earnings is pegged at $6.36 per share, which has witnessed two upward estimate revisions in the past week against none in the opposite direction. The estimate indicates 19.3% year-over-year growth. Aflac beat on earnings in all the last four quarters, the average surprise being 14.5%.
Aflac Incorporated Price and EPS Surprise
The consensus estimate for Aflac's current-year revenues stands at $18.6 billion. The company foresees enhanced sales in its Aflac Japan segment, driven by strategic initiatives such as product launches, updates and distribution strategies. Additionally, the positive performance of Japan Post contributes to the anticipated growth. The recently launched medical product in mid-September has demonstrated a promising start, further bolstering the company's outlook.
Management expresses confidence in the robust sales performance within its U.S. business. The anticipated strength is attributed to improving productivity and contributions from various platforms, including network, dental, vision, and group life and disability. These factors are poised to sustain positive results for the company.
Per the 2023-2024 Aflac WorkForces Report, benefits programs play a vital role in employee satisfaction and well-being. According to the report, 82% of employers believe that offering supplemental health insurance aids them with recruitment, thereby, enhancing AFL’s prospects for the future.
A significant improvement in the company’s expense ratio is expected to contribute to a decline in the combined ratio below the previous year's level. The implementation of cost-saving initiatives is anticipated to be a driving force for bottom-line growth. AFL expects the expense ratio in the Japan segment to come near the low end of its 20-22% outlook for 2023. The U.S. segment’s expense ratio is expected to surpass the outlook of 37-40%. However, several businesses that raised the expense ratio are expected to grow over time and bring this metric down in the future. AFL's commitment to maintaining an agile workforce is poised to enhance efficiency in the medium to long term.
Aflac's robust balance sheet, highlighted by $5.5 billion in cash and cash equivalents as of Sep 30, 2023, positions the company favorably for initiatives aimed at enhancing shareholder value. With expected debt maturities of $1.3 billion over the next five years, Aflac maintains financial flexibility.
In the third quarter alone, the company demonstrated confidence in its financial position by repurchasing 9.4 million shares, amounting to $700 million. As of the end of the third quarter, it still had 86.4 million shares available for further buybacks, underscoring its commitment to returning value to shareholders.
However, Aflac’s net cash from operations declined 15.2% in 2021, 23.2% in 2022 and 17.2% in the first nine months of 2023. This sustained trend could potentially impact the company's ability to support and sustain future operations. However, we believe that a systematic and strategic plan of action will drive growth in the long term.
Other Key Picks
Some other top-ranked stocks in the broader Finance space are Alerus Financial Corporation ALRS, Navient Corporation NAVI and Finward Bancorp FNWD. Each stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for Alerus Financial’s 2023 earnings is pegged at $1.60 per share, which remained stable over the past week. ALRS beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 16.6%.
The Zacks Consensus Estimate for Navient’s 2023 earnings is pegged at $3.49 per share, indicating a 9.4% year-over-year increase. It has witnessed one upward estimate revision against none in the opposite direction during the past month. The consensus mark for NAVI’s revenues in 2023 is pegged at $964.7 million.
The Zacks Consensus Estimate for Finward’s 2023 earnings is pegged at $2.07 per share, which has improved 63% in the past 60 days. FNWD has witnessed one upward estimate revision against none in the opposite direction during this time.