Here's Why You Should Hold Globe Life (GL) in Your Portfolio
Globe Life Inc. GL is well-poised to gain from higher premiums, net investment income and strong segmental performances.
Zacks Rank & Price Performance
GL currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 18.3% compared with the industry’s growth of 4.6%.
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Return on Equity
Its return on equity, a measure reflecting how efficiently a company utilizes shareholders’ money, was 19.2% in the trailing 12 months, better than the industry’s average of 15.9%.
Style Score
Globe Life has a VGM Score of A. This style score helps identify stocks with the most attractive value, best growth, and most promising momentum.
Rising Estimates
The Zacks Consensus Estimate for GL’s 2023 earnings is pegged at $10.4 per share, indicating a 27.6% increase from the year-ago reported figure.
The consensus estimate for GL’s 2024 earnings is pegged at $11.26 per share, indicating an 8.3% increase from the 2023 figure.
The company beat earnings estimates in each of the last four quarters, the average surprise being 2.1%.
Factors Driving Globe Life
Globe Life has been witnessing a positive trend in revenues driven by premium growth at its Life Insurance and Health Insurance segments and net investment income. The company expects life premium to grow 4% in 2023. The health premium revenues are expected to grow 3% in 2023. Underwriting margin, which is an important determinant for bottom-line growth, is expected to grow in the range of 37%-39% for Life Insurance and 28%-30% for Health Insurance segments.
The strong performance of the American Income and Liberty National divisions should continue to drive the top line in the future. Liberty National should continue to benefit from improved productivity and agent count. GL’s expansion initiatives to capture heavily populated and less penetrated areas should drive growth in the future. The company expects net life sales to grow in the low single digits and low double digits for American Income Life and Liberty National, respectively.
Moreover, net investment income continues to be another important driver of the company’s top-line growth and has been exhibiting improvement over the last few years. A favorable rate environment is conducive to the growth of net investment income, which is expected to be 5% in 2023.
The company’s financial flexibility enables it to return capital to shareholders. In the first quarter, the company repurchased 1.2 million shares for $135 million. In February 2023, the company hiked its dividend by 8.6% to 22.50 cents per share. The company expects excess cash flow to be in the range of $420-$440 million for 2023. This is a positive for investors seeking returns in the form of dividends.
Key Concerns
There are a few factors that have been impeding the stock’s growth lately.
The company has been witnessing high costs due to a rise in policyholder benefits, higher amortization of deferred acquisition costs, commissions, premium taxes, non-deferred acquisition costs and other operating expenses. Such costs tend to weigh on the company’s margins. High debt levels further put pressure on margins due to high interest expenses.
Key Picks
Some better-ranked stocks in the Financial – Miscellaneous Services space are Axos Financial, Inc. AX, Chicago Atlantic Real Estate Finance, Inc. REFI and WisdomTree, Inc. WT. Each of these companies presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The bottom line of Axos Financial outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 9.5%. The consensus mark for AX’s 2023 earnings indicates a 17.5% rise from the year-ago figure. The same for revenues indicates a 24.6% rise from the year-ago figure.
The bottom line of REFI outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 4.5%. The consensus mark for REFI’s 2023 earnings indicates a 36.3% rise from the year-ago figure. The same for revenues indicates a 34.2% rise from the year-ago figure.
The bottom line of WisdomTree outpaced the Zacks Consensus Estimate in one of the trailing four quarters, met twice and missed once, the average surprise being 6.9%. The consensus mark for WT’s 2023 earnings indicates a 34.6% rise from the year-ago figure. The same for revenues indicates a 14.7% rise from the year-ago figure.
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AXOS FINANCIAL, INC (AX) : Free Stock Analysis Report
Globe Life Inc. (GL) : Free Stock Analysis Report
Chicago Atlantic Real Estate Finance, Inc. (REFI) : Free Stock Analysis Report
WisdomTree, Inc. (WT) : Free Stock Analysis Report
