StanCorp Reiterated at Underperform - Analyst Blog
June 10 2011 - 11:39AM
Zacks
We retain our Underperform rating on StanCorp Financial
Group Inc. (SFG) as the company continues to face a
slowdown in top-line
growth and has higher exposure to commercial mortgages loan.
StanCorp is facing a slowdown in top-line growth, constrained by
economic and competitive forces. Premiums remain pressured
due to a group insurance market that continues to reflect a
price-competitive sales environment and declines in wage growth and
employment levels.
This line of
business has also witnessed an increase in claim incidence. An
increased level of claims incidence in group long term disability
business has affected the first quarter results.
The company’s exposure to
commercial mortgages loan is higher than that of its peers. Over
the last several quarters, delinquency rates in StanCorp’s
commercial mortgage loan portfolio have risen. The company has also
experienced a corresponding increase in foreclosure
activity.
StanCorp has experienced softness in revenues in its retirement
plans business over the past several quarters due to depressed
equity markets and their impact on assets under administration.
Counting on the positives, StanCorp’s Asset Management segment
is benefiting from an increase in administrative fees on increased
cash flows. Also, StanCorp enjoys a strong capital position. The
company has achieved double digit compounded annual growth rate in
book value as well as dividend per share.
StanCorp is returning value to shareholders by buying back
shares. Recently, the company’s board authorized another buyback of 3.0 million shares
under its current share repurchase program. Furthermore, StanCorp
has an excellent underwriting track record in its core employee
benefits business.
StanCorp Financial reported
its first-quarter 2011 earnings of $0.76 per share from continuing
operations, in line with the Zacks Consensus Estimate. The quarter
experienced higher level of claims incidence in group long term
disability business resulting in soft performance.
Based on the first quarter
results, StanCorp remains apprehensive of attaining a net income of
$4.80-$5.10 per share.
The Zacks Consensus Estimate for second-quarter 2011 is $1.07
per share. For full years 2011 and 2012, the Zacks Consensus
Estimates are, respectively, $4.25 per share and $5.21 per
share.
The quantitative Zacks #4 Rank (short-term Sell rating) for
StanCorp indicates downward pressure on the stock over the near
term.
Headquartered in Portland, Oregon, StanCorp Financial Group is
one of the largest providers of employee benefits products and
services in the U.S. The company operates across the country, with
a dominant position in western U.S. It competes with Unum
Group (UNM), MetLife, Inc. (MET) and
Principal Financial Group Inc. (PFG).
METLIFE INC (MET): Free Stock Analysis Report
PRINCIPAL FINL (PFG): Free Stock Analysis Report
STANCORP FNL CP (SFG): Free Stock Analysis Report
UNUM GROUP (UNM): Free Stock Analysis Report
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