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Why Hold Strategy is Apt for Manulife Financial (MFC) Now

Zacks Equity Research

Manulife Financial MFC is well-poised for growth driven by its sturdy Asia business, expanding wealth and asset management business and strong capital position.

Its return on equity was 13.3% in the trailing 12-month period, higher than the industry average of 9.9%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds. Over the medium term, the company estimates return on equity of 13%.

The company has an impressive VGM Score of B. This style score helps to find the most attractive value, best growth, and most promising momentum stock. This life insurer in Canada has seen its estimates for 2019 move up nearly 1% in the past 60 days, indicating investor optimism on the stock.

Shares of have rallied 28.5% year to date compared with the industry’s increase of 21.4% and the Zacks S&P 500 composite’s rise of 18.6%.

This Zacks Rank #3 (Hold) life insurer remains focused on expanding its Asian business that contributes majorly to the company’s earnings. Expanded distribution network and distribution agreements with key partners in the region should continue to drive results.

Manulife is consistently expanding its wealth and asset management business and had $1 trillion in global assets under management and administration at second-quarter 2019 end. While the company already has a solid presence in North America and Asia, it has identified Europe and the wider EMEA market as significant growth areas and is making investments there.

The company also aims to lower costs, targeting an expense efficiency ratio of less than 50% or $1 billion in cost savings and avoidance by 2022. Given a solid operational performance coupled with cost savings initiatives, the company should easily achieve the goal.

The company has a decent earnings surprise history, as it beat estimates in two of the last four quarters with the average beat being 4.95%.

The company also has a solid capital position and aims $5 billion in capital release by 2022 by optimizing its portfolio. A solid capital position aided the company in making six dividend increases in three years. Its dividend yield of 4.2% betters the industry average of 1.9% while the company announced its intention to more than double the share buyback program to 99 million shares.  

The Zacks Consensus Estimate for 2019 and 2020 earnings indicates 4.7% and 6.4% growth, respectively, from the year-ago reported figure. Manulife targets core EPS growth in the range of 10% to 12% over the medium term. The expected long-term earnings growth is pegged at 10%.

Stocks to Consider

Some better-ranked life insurance stocks include Genworth Financial GNW, Health Insurance Innovations HIIQ and Primerica PRI.

Genworth provides insurance and homeownership solutions in the United States and internationally. The company delivered positive surprise of 60.00% in the last reported quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Health Insurance Innovations operates as a cloud-based technology platform and distributor of individual and family health insurance plans, and supplemental products in the United States. The company delivered positive surprise of 104.00% in the last reported quarter. The stock sports a Zacks Rank #1.

Primerica provides financial products to middle income households in the United States and Canada. The company delivered positive surprise of 3.2% in the last reported quarter. The stock carries a Zacks Rank #2 (Buy).

5 Stocks Set to Double

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Primerica, Inc. (PRI) : Free Stock Analysis Report
 
Manulife Financial Corp (MFC) : Free Stock Analysis Report
 
Genworth Financial, Inc. (GNW) : Free Stock Analysis Report
 
Health Insurance Innovations, Inc. (HIIQ) : Free Stock Analysis Report
 
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Zacks Investment Research