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Here's Why Brighthouse (BHF) Stock is an Attractive Bet Now

Zacks Equity Research

Brighthouse Financial, Inc. BHF is currently riding on higher premiums, net investment income and strong segmental performance.

The stock has a VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.

Shares of Brighthouse have lost 21.2% year to date compared with the industry’s decline of 34.5%. Moreover, the company’s policy to ramp up its growth profile and capital position should drive shares higher.

The company has a decent earnings surprise history. It surpassed estimates in each of the trailing four quarters, the beat being 14.38%, on average.

The Zacks Consensus Estimate for 2020 and 2021 earnings per share is pegged at $8.48 and $10.10, indicating increase of nearly 225.4% and 19.1%, respectively from the year-ago reported figures.

Estimates for Brighthouse have been revised upward over the past seven days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2021 earnings per share has moved up 1.3% in the said time frame.

Factors Driving Brighthouse Financial

The company's top line has been increasing over the years owing to higher premiums, investment income and other revenues. The metric witnessed CAGR of 29.5% over the last three years (2016-2019). Solid performance at the Annuities, Life and Run-off segments are likely to drive revenues in the days ahead.

Net investment income continues to be another important driver of the company’s top-line growth and has been exhibiting improvement over the last several years. The metric witnessed four-year CAGR (2015-2019) of 3.67%. Despite the current low interest rate environment, well-diversified and high-quality portfolio as well as conservative investment strategy will continue to drive net investment income.

The company also focuses on heavy investments in technology infrastructure. The establishment costs decreased at a two-year CAGR (2017-2019) of 14.6% and 48% in the first quarter of 2020.  The company expects establishment costs to be between $150 million and $160 million in 2020 and $25 million to $35 million in 2021, all on a pre-tax basis.

As part of the strategic initiatives, the company introduced products like Index Horizon's, a fixed indexed annuity product and Brighthouse SmartCare, a new hybrid life insurance product, in a bid to expand the distribution network and to increase sales. Such efforts boosted Annuity sales by 15% and Life insurance sales by 1500% year over year in the first quarter of 2020.

Brighthouse has a Zacks Rank #2 (Buy) and an impressive Value Score of A. Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.

Other Stocks to Consider

Some other top-ranked insurance stocks include American Equity Investment Life Holding Company AEL, The Allstate Corporation ALL and Palomar Holdings Inc. PLMR each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Equity Investment surpassed estimates in each of the last four quarters, with the average positive surprise being 63.04%.

Allstate surpassed estimates in each of the last four quarters, with the average positive surprise being 18.45%.

Palomar surpassed estimates in two of the last four quarters, with the average positive surprise being 10.93%.

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The Allstate Corporation (ALL) : Free Stock Analysis Report
American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report
Brighthouse Financial, Inc. (BHF) : Free Stock Analysis Report
Palomar Holdings, Inc. (PLMR) : Free Stock Analysis Report
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