In this article, we discuss the 5 stocks that analysts just increased price targets of. If you want to read our detailed analysis of these stocks, go directly to Analysts Just Increased Price Targets of These 10 Stocks.
5. Aflac Incorporated (NYSE:AFL)
Number of Hedge Fund Holders: 33
Aflac Incorporated (NYSE:AFL) is an insurance company with solid fundamentals. The firm reported earnings per share of $1.59 for the second quarter, beating estimates by $0.31. The revenue over the period was $5.5 billion, beating predictions by $190 million. The company is ranked fifth on our list of 10 stocks that analysts just increased price targets of.
Aflac Incorporated (NYSE:AFL) stock was given an Overweight rating by Morgan Stanley on October 14 and the price target was raised to $63 from $61. The company beat market expectations on earnings per share and revenue in the second quarter.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based firm Ariel Investments is a leading shareholder in Aflac Incorporated (NYSE:AFL) with 1.4 million shares worth more than $79 million.
In its Q2 2021 investor letter, Madison Funds, an asset management firm, highlighted a few stocks and Aflac Incorporated (NYSE:AFL) was one of them. Here is what the fund said:
“This quarter we are highlighting Aflac (AFL) as a relative yield example in the Financial sector. AFL is a leading provider of life and supplemental medical insurance in Japan and the U.S. AFL products offer financial protection against loss of income for policy holders based on qualifying health events. Aflac Japan generates approximately 70% of total revenues, and the company has dominant market share in Japan. In the U.S., AFL provides voluntary insurance for policy holders at businesses with products sold through payroll deduction by its large sales force which sells primarily through face-to-face interactions. We believe AFL’s dominant market position in Japan and its large U.S. sales force create a sustainable competitive advantage for the company.
Our thesis on AFL is that its sales will recover from the impact of the COVID pandemic, and it will return significant amount of capital to shareholders. Sales were negatively impacted in both Japan and the U.S. but appear to be in early stages of recovering. We believe sales will improve further as economies open and new products are introduced in Japan. In the U.S., agents will be able to return to face-to-face interactions as people get vaccinated, something that was restricted last year.
In terms of capital returns, AFL committed to returning $8-9 billion between 2020-2022, which is expected to be 75% of operating earnings. The company returns capital via share buybacks and dividend increases. AFL is a Dividend Aristocrat that has increased its dividend 39 years in a row including 10% annually over the last five years; it also recently announced an 18% dividend increase. Other favorable attributes include an A- rated balance sheet by Standard and Poor’s and an attractive valuation with a relative yield near the high end of its historical range.
We believe its valuation is cheap with its forward expected Price/Earnings (P/E) ratio just 9x and a relative P/E of 0.4x versus the S&P 500 despite an industry leading return on equity. At the time of purchase, AFL had a dividend yield of 2.5% and its relative dividend yield vs. the S&P 500 was 1.8x, as shown. Some risks to the thesis include a prolonged economic downturn, loss of market share due to unsuccessful new product roll outs and potential losses in its investment portfolio.”
