Estimates for Torchmark Corporation TMK 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 earnings being raised 0.2% to $6.04.
This provider of annuities, whole and term life insurance, accidental death insurance, health insurance, Medicare supplements and long-term healthcare policies carries a favorable VGM Score of B. Shares of this Zacks Rank #3 (Hold) insurer have gained 7% in a year against the industry’s 4.4% decline.
Let’s focus on the factors that make Torchmark a stock to retain for attractive returns.
Solid Performance at American Income: Torchmark’s most important distribution channel —American Income Exclusive Agency — has been witnessing higher net sales, driven by increased agent count. The company projects life sales growth between 5% and 9% in 2018. An estimated producing agent count between 7,000 and 7,400 in 2018 should drive premiums higher.
Consistent Operations 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 increasing sales or sales levels or margins as a percentage of premiums bearing fruit. Torchmark anticipates 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 3% rise in excess investment income.
Effective Capital Management: Torchmark enjoys a solid cash flow, helping it effectively deploy capital. By virtue of its intelligent capital management strategy, the company generated more than 80% returns for investors over the past 10 years.
For 2018, Torchmark estimates free cash flow between $325 million and $335 million.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $6.04, representing a year-over-year increase of 25.3% on 3.3% higher revenues of $4.3 billion. For 2019, the consensus mark for the bottom line stands at $6.50, translating into a 7.5% year-over-year rise while the same for the top line is projected at $4.2 billion, up 3.6%.
Torchmark has expected long-term earnings per share growth of 12.9%.
Positive Earnings Surprise History: The company flaunts a stellar earnings surprise history, exceeding the Zacks Consensus Estimate in the last nine quarters. This outperformance in turn, underlines the company’s operational efficiency. The average seven-quarter positive earnings surprise is 1.78%.
Stocks to Consider
Some better-ranked stocks from the insurance industry are GWG Holdings, Inc. GWGH, American Equity Investment Life Holding Company AEL and Alleghany Corporation Y, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GWG Holdings purchases life insurance policies in the secondary market in the United States. It pulled off an average four-quarter positive surprise of 195.14%.
American Equity Investment provides life insurance products and services in the United States. The company came up with four-quarter average positive surprises is 24.38%.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. It delivered an average four-quarter earnings surprise of 17.61%.
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