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Voya Financial (VOYA) Up 36% YTD: Will the Rally Continue?

Zacks Equity Research

Voya Financial’s VOYA shares have surged 36.4% year to date, outperforming the industry's growth of 17% and the Zacks S&P 500 composite’s rise of 16.8%. Solid segmental performance, cost saving initiatives, strong capital position and prudent capital deployment should continue to drive the stock.

With a market capitalization of $7.7 billion, average volume of shares traded in the last three months was 1.3 million.

Is the Bull Run Likely to Continue?

This Zacks Rank #3 (Hold) retirement, investment, and employee benefits company in the United States has a decent track record of delivering positive earnings surprise in three of the last four quarters, with the average beat being 4.96%.

Voya Financial has an impressive VGM Score of B. This style score helps to identify stocks with the most attractive value, growth and momentum.

The company is poised to grow its earnings given its focus on high-growth, high-return, capital-light businesses. Its core businesses — Retirement, Investment Management and Employee Benefits — are expected to drive the company’s earnings over the next three years. Voya expects its Retirement business to boost earnings by 4% to 7% on the back of expansion of distribution network and achievement of efficiencies through automation. Investment Management earnings are expected to grow 5% to 8% while Employee Benefits earnings are expected to increase in the range of 7% to 10%.

Voya Financial remains committed to lower expenses and drive margin expansion. The company is on track to achieve $230 million to $250 million in annual rate cost savings by the end of 2020.

The company thus remains optimistic about delivering 10% plus bottom-line growth in 2019 driven by a combination of organic growth, cost savings, and capital deployment. Organic growth will play a larger role in 2020 and 2021 in boosting earnings.

Voya Financial has been effectively strengthening its balance sheet. While its risk-based capital ratio of 429% is above the new target of 400%, debt-to-capital ratio of 27% is below the 30% target. The company also expects total free cash flow conversion of 85% to 95%.

Voya Financial also deploys capital to enhance shareholder value. While it has $500 million of share buyback authorization, it has already achieved its dividend yield target of at least 1% by increasing dividend to 15 cents in August 2019.

The Zacks Consensus Estimate for the company’s 2019 and 2020 earnings indicates improvement of 35.9% and 13%, respectively from the year-ago reported figure. The expected long-term earnings growth is pegged at 19%, better than the industry average of 11.7%.

Stocks to Consider

Some better-ranked insurers include Genworth Financial GNW, Health Insurance Innovations HIIQ and American Equity Investment Life Holding Company AEL.

Genworth provides insurance and homeownership solutions in the United States and internationally. The company delivered positive surprise of 60.00% in the last reported quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Health Insurance Innovations operates as a cloud-based technology platform and distributor of individual and family health insurance plans, and supplemental products in the United States. The company delivered positive surprise of 104.00% in the last reported quarter. The company sports a Zacks Rank #1.

American Equity Investment provides life insurance products and services in the United States. The company delivered positive surprise of 14.74% in the last reported quarter. The stock carries a Zacks Rank #2 (Buy).

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