Estimates for Sun Life Financial Inc. SLF have been revised upward over the past 60 days, reflecting analysts’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 move 0.6% north to $3.57.
Shares of this Zacks Rank #3 (Hold) life insurer have inched up 0.4% in a year against the industry’s decrease of 9.8%.
Sun Life Financial’s expanding international business with focus on Asian operations, growing Global Asset Management business and a well-diversified business profile positions it well for the long term.
Let’s take a look at the factors that make Sun Life Financial a stock worth holding on to.
Intensifying Focus on Asia Operations: As a part of expanding its global footprint, the company has intensified focus on Asian operations. Contribution from these has nearly doubled over the past few years. The company boasts a solid presence in China, Philippines, India, Hong Kong, Indonesia, Malaysia and Vietnam. Sun Life Financial continues to make strategic investments in Asia to retain the momentum.
Growing Global Asset Management Business: Sun Life Investment Management deploys its investment capabilities in private fixed income, mortgages as well as real estate by putting its money on pension plans and other institutional investors. This in turn, strengthens the company’s Asset Management pillar that provides higher return on equity, required lower capital and lower volatility. It also renders great potential for an earnings upside.
Compelling Inorganic Story: The company has been pursuing strategic acquisitions to ramp up its growth profile, add capabilities to its portfolio and expand its international presence. These transactions further broadened Sun Life’s wealth business base in Hong Kong and also leveraged its global expertise in pensions.
Intelligent Capital Management: Sun Life Financial has a disciplined capital management policy in place with regular dividend hikes and share buybacks. Its dividend currently yields 3.7%, better than the industry average of 2.2%. The company targets a dividend payout ratio of 40-50%.
Moreover, it is effectively improving its leverage and targets a long-term financial leverage ratio of 25%.
Return on Equity: Sun Life Financial’s return on equity stands at 13.4%, above the industry average of 11.3%. Return on equity underscores profitability, determining how efficiently the company is utilizing its shareholders’ funds. The company targets medium-term EPS growth between 12% and 14%.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $3.57, representing a year-over-year increase of 11.6%.
For 2019, the Zacks Consensus Estimate for earnings per share stands at $3.83, reflecting a year-over-year rise of 7.2%.
The company targets medium-term EPS growth between 8% and 10%.
Stocks to Consider
Some better-ranked stocks from the life insurance industry are Athene Holding Ltd. ATH, Primerica, Inc. PRI and American Equity Investment Life Holding Company AEL.
Athene issues, reinsures and acquires retirement savings products in the United States. The company’s average four-quarter positive surprise is 15.03%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Primerica distributes financial products to middle income households in the United States and Canada. The company’s average four-quarter earnings surprise is 5.89%. The stock has a Zacks Rank of 1.
American Equity Investment provides life insurance products and services in the United States. The company’s average four-quarter beat is 22.24%. The stock carries a Zacks Rank #2 (Buy).
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