It has been about a month since the last earnings report for Aflac (AFL). Shares have lost about 10.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Aflac due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Aflac's Q2 Earnings and Revenues Surpass Estimates
Aflac Inc.’s earnings per share of $1.13 beat the Zacks Consensus Estimate by 5.6% and increased by the same measure, year over year.
Total revenues in the quarter decreased 1.4% year over year to $5.5 billion but beat the Zacks Consensus Estimate by 0.2%.
Annualized adjusted return on equity, excluding foreign currency impact, was 15.7%, down 40 basis points year over year.
Further, total acquisition and operating expenses inched up 0.8% year over year to $1.44 billion.
Weak Results at Aflac Japan
Total revenues declined 1.4% year over year to $3.8 billion, led by a 1.7% decline in premium income to $3.2 billion, partly offset by 0.5% rise in net investment income to $609 million. Pre-tax operating earnings decreased 0.6% from the prior-year quarter to $831 million.
Favorable Performance by Aflac U.S.
Total revenues increased 1.9% year over year to $1.6 billion, led by a 2.3% increase in premium income to $1.5 billion, partly offset by 1.1% decline in net investment income to $180 million. Pre-tax operating earnings from the U.S. segment were $338 million, down 0.6% year over year.
Share Repurchase Update
The company purchased 6.9 million shares worth $357 million during the second quarter.
Solid Financial Position
Total investments and cash as of Jun 30, 2019 were $136.6 billion, up 6.8% year over year.
At the end of the second quarter of 2019, total assets were $151.4 billion, up 6.6% year over year.
Shareholders' equity (excluding AOCI) was $29.54 billion, as of Jun 30, 2019, up 8.5% 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, estimates review have trended downward during the past month.
Currently, Aflac has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Aflac has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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