On Dec 28, Zacks Investment Research upgraded StanCorp Financial Group Inc. (SFG) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
StanCorp Financial has witnessed rising earnings estimates on the back of solid results and a strong effort to increase shareholders’ value. This life insurer delivered positive earnings surprises in the last four quarters, with an average beat of 28.3%. The expected long-term growth rate for the stock is 13.1%.
In the last reported quarter, StanCorp Financial’s operating income of $1.45 per share substantially surpassed the Zacks Consensus Estimate by 39.4% and the year-over-year number by 38%.
The improvement came following increased favorable claims experience in the Group Insurance business and higher earnings in the company’s Asset Management segment.
Total benefits and expenses of StanCorp Financial declines 4.9% year over year. Decline in benefits to policyholders, operating expenses, and interest expenses over the prior-year quarter aided results.
StanCorp Financial is also garnering investor confidence by enhancing its shareholders’ value through greater profit distribution and share repurchase activities. In the last reported quarter, StanCorp purchased 0.82 million shares for $44.1 million and is left with 1.5 million shares under its authorization.
Moreover, the company recently increased its annual cash dividend by 18%. The company now pays an annual cash dividend of $1.10 per share, which presently yields at 1.66%, higher than the industry yield of 1.36%.
The dividend payments and share repurchase activities at StanCorp Financial are supported by the company’s strong cash balance. As of Sep 30, 2013, cash and cash equivalent was $345.4 million, significantly up from $160.7 million as of Dec 31, 2012.
The Zacks Consensus Estimate for 2013 increased 3.3% to $5.02 per share over the last 60 days. The estimate translates to a year over year increase of 55.1%. For 2014, the estimate moved up by 2.5% to $4.96 per share over the same time frame.
Other Stocks to Consider
Other life insurers also worth considering are American Equity Investment Life Holding Co. (AEL), Manulife Financial Corp. (MFC) and Primerica Inc. (PRI). All these stocks carry a Zacks Rank #2 (Buy).