On Jun 17, Zacks Investment Research upgraded Unum Group (UNM) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Unum Group has witnessed rising earnings estimates on the back of strong first-quarter 2014 results. Moreover, this accident and health insurer delivered positive earnings surprises in the last four quarters, with an average beat of 2.4%.
Unum Group reported first-quarter operating net earnings of 88 cents a share, outperforming the Zacks Consensus Estimate by 2.4% and improving 8.8% from the year-ago quarter. Better performance by the core business largely drove the upside. Operating earnings growth of 4.7% marked the highest rate since 2011.
With respect to returning value to shareholders, the board of directors of Unum Group hiked the company’s quarterly dividend by 14% to 16.5 cents per share. The latest hike marks the sixth straight year of increase. The accident and health insurer has increased its dividend by about 120% over the last 7 years. This, in a way, retains investor confidence in the stock as well as attracts potential investors. Unum Group also engages in share buybacks. With $100 million shares bought back in the last quarter, the tally reaches $2.6 billion over the last six and half years, lowering the share count by about 29%.
Banking on the strength of its operational performance, Unum expects full-year 2014 operating earnings to grow in the range of 5–10% over the 2013 level. The company also expects improvement in group disability earnings along with improvements in the benefit ratio.
Strong results and well as continued efforts to enhance shareholders’ value prompted upward revisions in Zacks Consensus Estimate for 2014. With 7 of 14 estimates moving north over the last 60 days, the Zacks Consensus Estimate moved up 0.3% to $3.54. This also represents a year-over-year improvement of 6.7%. The expected long-term growth rate for the stock is 8.6%.
Other Stocks to Consider
Investors interested in the insurance industry may also consider stocks like W.R. Berkley Corporation (WRB), Endurance Specialty Holdings Ltd. (ENH) and First American Financial Corporation (FAF). All these stocks sport a Zacks Rank #1 (Strong Buy).