Voya Financial, Inc. VOYA is well-poised to gain from strategic initiatives and cost cutting initiatives.
The company has a decent earnings surprise history. It has a trailing four-quarter positive earnings surprise of 8.55%, on average.
The Zacks Consensus Estimate for 2020 and 2021 earnings per share is pegged at $4.29 and $6.03, indicating an improvement of 22.57% and 40.47%, respectively, from the year-ago reported figure.
Shares of this Zacks Rank #3 (Hold) company have lost 15.5% in a year, compared with the industry’s decline of 25.1%.
Factors Driving the Company’s Performance
Voya Financial continues to benefit on the back of improved premiums, which has resulted in top-line growth. We believe the company’s strong performance across its segments — Retirement, Investment Management and Employee Benefits — are likely to drive revenues in the days ahead. Though the company is likely to benefit from high retention rates, it anticipates slowdown of sales across its business lines due to the financial turmoil induced by the COVID-19 pandemic.
Nevertheless, the life insurer has geared up for assisting Americans grappling with financial woes as a result of the pandemic. Per certain steps announced in April of this year, Voya Financial will rebate fees associated with coronavirus-related distributions allowed under the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act, hardship distribution fees and loan initiation fees from Apr 1 through Sep 30 to participants in the defined contribution (DC) plans.
Moreover, the company has been focused on enhancing its diverse range of products and services. Last week, Voya Financial rolled out a Leave Management solution, which will come into force from Jan 1 of next year. This integrated solution will enable employers in effective processing of paid time off for their employees. Last month, the life insurer also introduced an online platform — myHealthMoney. In a scenario of escalating healthcare costs across the United States, the new tool will assist Americans in making planned decisions about healthcare expenses and subsequent contribution to Voya health savings account (HSA). Such strategic initiatives bode well for the life insurer.
Furthermore, Voya Financial has also undertaken several cost cutting efforts aimed at margin expansion. Divestiture decisions to focus on its high-growth, high-return, capital-light businesses bode well for the life insurer as well. Thereby, we believe that company will generate high cost savings going forward on the back of such strategic initiatives.
However, the company’s return on equity of 7.4% compares unfavorably with the industry average of 11.9%. This implies inefficient utilization of shareholders’ funds.
Stocks to Consider
Some better-ranked insurance stocks include American Equity Investment Life Holding Company AEL, Brighthouse Financial, Inc. BHF and EverQuote, Inc. EVER each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American Equity Investment beat estimates in each of the trailing four quarters, with the average positive surprise being 63.04%.
Brighthouse surpassed estimates in each of the preceding four quarters, with the average positive surprise being 14.38%.
EverQuote outpaced estimates in each of the preceding four quarters, with the average positive surprise being 86.67%.
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