Yahoo Finance Here's Why You Should Stay Invested in Unum (UNM) Stock
Unum Group UNM is poised to grow on the strength of disciplined sales trends, strong persistency, an improving rate environment, favorable risk experience and a solid capital position. It has a VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum.
Earnings of this leading disability income writer have increased 9% over the last five years, outperforming the industry average of 3.8%. UNM delivered a four-quarter average earnings surprise of 3.76%.
The Zacks Consensus Estimate for 2024 earnings has moved 2 cents north in the past seven days, reflecting analyst optimism.
Share Price and Zacks Rank
Shares of UNM have gained 16.7% year to date, compared with the industry’s increase of 6.9%, the Finance sector’s increase of 5.8% and the Zacks S&P 500 composite’s rise of 12%. It carries a Zacks Rank #3 (Hold).
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Return on Capital
UNM’s return on invested capital (ROIC) has been increasing over the last few quarters, reflecting its efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 9.4%, better than the industry average of 7.9%.
Unum estimates adjusted operating return on equity (ROE) between 12% and 14% from the core business in 2024.
Optimistic Growth Projection
The Zacks Consensus Estimate for 2024 earnings is pegged at $8.24, indicating a year-over-year increase of 7.6% on 4.3% higher revenues of $13 billion. The consensus estimate for 2025 earnings is pegged at $8.74, indicating a year-over-year increase of 6.1% on 3.8% higher revenues of $13.5 billion. Unum expects 7%-9% growth in adjusted operating EPS by 2024 and 8-10% growth in the long term.
The consensus estimate for long-term earnings growth rate is pegged at 5.7%. We expect the 2026 bottom line to witness a three-year CAGR of 8%. UNM is poised to grow on the strength of operational excellence of its two largest operating segments — Unum U.S. and Colonial Life.
Growth Drivers
Unum U.S., one of the largest operating segments of the company and contributing about two-thirds of the insurer’s premium, is poised to grow on disciplined sales trends, strong persistency in group lines and growth of new product lines like dental and vision. Management estimates sales growth of 5-10% and premium growth of 5-7% in 2024. We expect 2026 premiums to witness a three-year CAGR of 4%.
The Colonial Life segment, another important contributor, should benefit from improving premium income and favorable risk results. Management thus focuses on moving to a mix of businesses with higher growth and stable margins. It expects Colonial Life’s sales growth in the range of 8-12%, premium growth in the range of 2-4% and adjusted operating ROE in the range of 20-22% in 2024. We expect 2026 premiums to witness a three-year CAGR of 2.8%.
Unum’s in-force block growth and higher sales have been driving premiums. We estimate 2026 premiums to witness a three-year CAGR of 4%. Unum Group expects sales growth in the range of 7-10% and premium growth in the band of 5-7% in 2024. For the long term, it expects sales growth in the range of 8-12% and premium growth in the range of 4-7%.
Continued operational expertise enables Unum Group to enjoy a solid capital position and substantial statutory earnings and capital, leading to financial flexibility. Banking on consistent cash flow, the insurer distributes wealth to its shareholders in the form of dividend hikes and share repurchases.
As part of its capital payout policy, UNM has hiked dividends 13 times in the last 12 years. Also, UNM expects to repurchase $500 million worth of shares in 2024. The insurer expects to hike dividends by 10%-15% per year over the next five-year period. Its recent 15% dividend hike takes the dividend payout ratio to around 20%.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Arch Capital Group Ltd ACGL, The Allstate Corporation ALL and Brown and Brown BRO.
Arch Capital delivered a four-quarter average earnings surprise of 28.41%. The stock has gained 38.5% year to date. The Zacks Consensus Estimate for ACGL’s 2024 and 2025 earnings indicates a year-over-year increase of 1.2% and 5.2%, respectively. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Allstate delivered a four-quarter average earnings surprise of 41.88%. The stock has gained 20.2% year to date. The Zacks Consensus Estimate for ALL’s 2024 and 2025 earnings indicates a year-over-year increase of 1,479% and 14.7%, respectively. It carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Brown and Brown’s 2024 and 2025 earnings indicates a respective 24.5% and 7.9% increase year over year. BRO delivered a four-quarter average earnings surprise of 11.90%. Shares of BRO have risen 28.6% year to date. It carries a Zacks Rank #2.
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