It has been about a month since the last earnings report for Aflac (AFL). Shares have added about 5.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aflac due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Aflac's Q1 Earnings and Revenues Surpass Estimates
Aflac Inc.’s first-quarter earnings per share of $1.12 beat the Zacks Consensus Estimate by 6.7% and increased by the same measure, year over year.
The company’s results largely indicate strong net investment income and favorable benefit ratios in its Japan segment.
Total revenues in the fourth quarter increased 3.6% year over year to $5.7 billion and beat the Zacks Consensus Estimate by 3.2%.
Annualized adjusted return on equity, excluding foreign currency impact, in the first quarter was 16% unchanged relative to year-ago quarter.
Further, total acquisition and operating expenses inched up 0.6% year over year to $1.45 billion.
Weak Results at Aflac Japan
Total revenues declined 1.6% year over year to $3.8 billion, led by a 2.5% decline in premium income to $3.2 billion, partly offset by 3.7% rise in net investment income to $610 million. Pre-tax operating earnings increased 2% from the prior-year quarter to $834 million.
Favorable Performance by Aflac U.S.
Total revenues increased 2.2% year over year to $1.6 billion, led by a 2.4% increase in premium income to $1.5 billion and 1.1% growth in net investment income to $177 million, driven by higher income from floating rate assets.
Pre-tax operating earnings from the U.S. segment were $323 million, down 4.2% year over year, driven by increased benefit ratio and higher expense ratio.
Share Repurchase Update
The company purchased 10.2 million shares worth $490 million during the first quarter.
The board of directors declared first-quarter dividend of 27 cents per share, payable on Jun 3, 2019 to shareholders of record at the close of business as of May 22, 2019.
Solid Financial Position
Total investments and cash as of Mar 31, 2019 were $131.4 billion, almost unchanged year over year.
At the end of the first quarter of 2019, total assets were $145.7 billion, down 1.1% year over year.
Shareholders' equity (excluding AOCI) was $21.6 billion, as of Mar 31, 2019, up 4.8% year over year.
The company expects to achieve earnings per share in the range of $4.10-$4.30.
Aflac anticipates that in its Japan business, total earned premium of third sector and first sector protection products combined will slightly decline due to limited pay policies reaching paid-up status. Sales are expected to decline in low-to-mid single digits.
Coming to the U.S. segment, Aflac anticipates growth in earned premium within 2-3% and stable sales improvement for the full year.
The company anticipates $1.3-$1.7 billion of share buyback in 2019.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
At this time, Aflac has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Aflac has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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