Should You Retain Voya Financial (VOYA) in Your Portfolio?
Voya Financial, Inc. VOYA is well-poised for growth, driven by strategic acquisitions, higher underwriting results, improved investment income, stronger surplus income, lower credited interest and sufficient liquidity.
Growth Projections
The Zacks Consensus Estimate for Voya Financial’s 2023 earnings is pegged at $7.97 per share, indicating a 5.1% increase from the year-ago reported figure on 10.8% higher revenues of $1.29 billion.
The consensus estimate for 2024 earnings is pegged at $9.28 per share, indicating a 16.5% increase from the year-ago reported figure on 4.6% higher revenues of $1.35 billion.
Earnings Surprise History
Voya Financial has a solid earnings surprise history. It beat estimates in three of the last four quarters and missed in one, the average being 34.36%.
Zacks Rank & Price Performance
VOYA currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 11.7%, outperforming the industry’s rise of 5%.
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Return on Equity
The life insurer’s trailing 12-month return on equity was 16.6%, which expanded 770 basis points year over year. The figure reflects its efficiency in utilizing its shareholders’ funds.
Style Score
Voya Financial has a VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
Business Tailwinds
VOYA’s earnings are driven by its solid segmental performances across Wealth Solutions, Investment Management and Health Solutions. These businesses are higher-growth, higher-return and capital-light units, boasting the company’s solid presence in the market.
The Wealth Solutions segment is steadily witnessing significant growth on the back of continued strength in underlying business results, higher surplus income, lower credited interest, improved investment income, weaker fee-based margin, a favorable change in DAC/VOBA and lower administrative expenses. In Wealth Solutions, full-service recurring deposits should continue to gain from growth in corporate markets. Voya Financial continues to expect deposit growth to exceed 10% for 2023 in Wealth Solutions.
The Investment Management segment should gain from higher investment capital returns owing to its overall market performance and improved fee revenues, driven by higher average equity markets and positive net flows. Voya Financial expects overall net revenues to increase, given the growth in fee-based revenues heading into the second half of 2023.
VOYA is constantly taking strategic steps to ramp up growth in its Investment Management segment. Voya Financial and Allianz Global Investors have inked a long-term strategic partnership that has added scale and diversification to Voya Investment Management. The transaction is expected to be accretive to the company’s adjusted operating earnings per share, which is estimated at 6-8% for 2023. In addition, Voya IM’s adjusted operating margin is expected to increase in the range of 29-31% in 2023 and 30-32% in 2024.
The Health Solutions segment of Voya Financial is likely to benefit from growth across all product lines, higher underwriting results, improved investment income and lower net expenses.
The company’s capital levels remain strong. As of Jun 30, 2023, the estimated combined RBC ratio, with adjustments for certain intercompany transactions, was 405%. VOYA’s organic capital generation demonstrates the high free cash flow generation of businesses. Voya Financial exited the second quarter with cash and cash equivalents that increased 30% year over year. This financial flexibility provides strength to the insurer.
Operational excellence has been helping the company deploy capital for enhancing shareholders’ value. Capital deployment will continue to be a strong contributor to 12-17% annual EPS growth target. Increasing the dividend continues to reflect its confidence in the stability of cash flows at more than 90% free cash flow conversion and will help broaden the insurer’s investor base.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Assurant, Inc. AIZ, Old Republic International Corporation ORI and Radian Group Inc. RDN. While Assurant and Old Republic International sport a Zacks Rank #1 (Strong Buy) each, Radian Group carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Assurant’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 24.39%.
The Zacks Consensus Estimate for AIZ’s 2023 and 2024 earnings implies 13% and 11.8% year-over-year growth, respectively. In the past year, the insurer has declined 14.7%.
Old Republic International’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 29.8%.
The Zacks Consensus Estimate for ORI’s 2023 and 2024 earnings has moved 8.3% and 5.2% north, respectively, in the past 30 days. In the past year, the insurer has gained 13%.
Radian Group’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 30.88%.
The Zacks Consensus Estimate for RDN’s 2023 and 2024 earnings has moved 5.7% and 4% north, respectively, in the past 30 days. In the past year, the insurer has gained 17.4%.
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Assurant, Inc. (AIZ) : Free Stock Analysis Report
Radian Group Inc. (RDN) : Free Stock Analysis Report
Old Republic International Corporation (ORI) : Free Stock Analysis Report
Voya Financial, Inc. (VOYA) : Free Stock Analysis Report
