Why Is Sun Life (SLF) Up 3% Since Last Earnings Report?
A month has gone by since the last earnings report for Sun Life (SLF). Shares have added about 3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sun Life 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 catalysts.
Sun Life Q3 Earnings Surpass Estimates, Decrease Y/Y
Sun Life Financial Inc. delivered a third-quarter 2023 underlying net income of $1.19 per share, which beat the Zacks Consensus Estimate by 3.4%. However, the bottom line decreased 4% year over year. The underlying net income was reported at $693.2 million (C$930 million), which decreased 4.7% year over year.
Wealth sales decreased 11.2% year over year to $29.30 billion (C$39.32 billion) in the quarter under review. The new business contractual service margin was $275.79 million (C$370 million).
Segment Results
SLF Canada’s underlying net income increased 9.5% year over year to $251.9 million (C$338 million). Canada witnessed higher net investment income, driven by increased volume and yields, and improved disability experience, reflecting higher margins and shorter claims duration.
SLF U.S.’ underlying net income was $140 million, which decreased 19% year over year, reflecting lower dental results.
SLF Asset Management reported an underlying net income of $245.9 million (C$330 million), which grew 8.7% year over year. Asset Management witnessed higher average net assets, higher net investment income, favorable foreign exchange translation, higher fee-related earnings and favorable tax rate.
SLF Asia reported an underlying net income of $123.7 million (C$166 million). Asia witnessed good sales momentum and favorable mortality from lower claims volumes, offset by higher incentive compensation and expense experience.
Financial Update
Global assets under management were $970.47 billion (C$1,340 billion), up 4.2% year over year.
Sun Life Assurance’s Life Insurance Capital Adequacy Test (LICAT) ratio was 138% as of Sep 30, 2023, down 100 basis points (bps) from Jan 1, 2023.
The LICAT ratio for Sun Life (including cash and other liquid assets) was 147%, which expanded 500 bps from Jan 1, 2023. Sun Life’s return on equity was 16.6% in the third quarter, which expanded 1,430 bps year over year. The underlying return on equity of 17.7% contracted 170 bps year over year. The leverage ratio of 21.8% contracted 190 bps from Jan 1, 2023.
Dividend Update
In the reported quarter, the company’s board of directors increased its dividend by 4% to 78 cents per share. The amount will be paid out on Dec 29, 2023, to shareholders of record at the close of business on Nov 29.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Sun Life 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.
Outlook
Sun Life has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Sun Life belongs to the Zacks Insurance - Life Insurance industry. Another stock from the same industry, Brighthouse Financial (BHF), has gained 7.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Brighthouse Financial reported revenues of $2.09 billion in the last reported quarter, representing a year-over-year change of +9.6%. EPS of $4.18 for the same period compares with -$0.04 a year ago.
Brighthouse Financial is expected to post earnings of $3.97 per share for the current quarter, representing a year-over-year change of +13.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.
Brighthouse Financial has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Sun Life Financial Inc. (SLF) : Free Stock Analysis Report
Brighthouse Financial, Inc. (BHF) : Free Stock Analysis Report
