Why has Sun Life (SLF) declined 0.1% since the last earnings report?

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A months have passed since Sun Life’s last income report (SLF). Stocks lost around 0.1% over that time frame, underperforming the S&P 500.

Will the recent negative trend continue until its next results release, or is Sun Life likely to have a breakthrough? Before we dive into how investors and analysts have reacted in recent times, let’s take a look at the latest earnings report to better understand the important factors.

Sun Life Financial’s best second quarter earnings estimates, up year-on-year

Sun Life Financial Inc. posted underlying net income of $ 1.99 per share in the second quarter of 2021, beating Zacks’ consensus estimate by 5.2%. Net income improved 34.1% year-on-year.

Underlying net income of $ 718.7 million (C $ 883 million) increased 19% year over year. This improvement is attributable to business growth, a lower effective tax rate and a favorable credit experience, partially offset by unfavorable currency translation effects, lower investment activity and experience of unfavorable spending.

Insurance sales increased 14.7% year-over-year to $ 577.9 million (C $ 710 million), driven by increased sales in Canada and Asia. However, lower sales in the United States limited the increase. Fortune sales declined 2.9% year over year to $ 44.8 billion (C $ 55 billion) in the quarter under review. New business value improved 37.9% to $ 231.2 million (Cdn $ 284 million).

Segment results

SLF Canada’s underlying net income increased 3% year over year to $ 236 million (C $ 290 million) driven by a favorable credit experience, business growth and policyholder behavior, partially offset by lower investment activity and a less favorable mortality experience.

SLF US underlying net income was $ 134 million (C $ 165 million), up 34% from the prior year quarter, due to an experience of mortality , morbidity and favorable credit and higher investment activity, partially offset by an unfavorable expenditure experience and a gain recorded in the previous year resulting from the conclusion of a court case.

SLF Asset Management underlying net income of $ 253.1 million (C $ 311 million) increased 20% year-over-year, due to increase in average net assets (ANA) in MFS, partially offset by higher variable compensation charges in MFS.

SLF Asia reported underlying net profit of $ 123.7 million (C $ 152 million), which was up 6% year-over-year due to business growth, earnings higher new business and a favorable credit experience. However, an unfavorable expense experience, currency conversion impacts and higher Indian joint venture mortality reflected in other experiences were partially offset.

Financial update

Global assets under management were $ 1,100 billion (C $ 1,361 billion), up 20.3% year-over-year. Sun Life Assurance’s continuing minimum capital and surplus requirement (LICAT) ratio was 125% as of June 30, 2021, down 200 basis points from its end-2020 level.

Sun Life’s LICAT ratio (including cash and other liquid assets) was 147%, in line with the level at the end of 2020. Sun Life’s return on equity was 16.3% as of second quarter, up 690 basis points year over year. The underlying ROE of 16% increased 260 basis points year-on-year. The leverage ratio of 24.7% deteriorated by 120 basis points from the level at the end of 2020.

Update of dividends

On August 4, the company’s board of directors approved a dividend of 55 cents per share. The amount will be paid on September 29, 2021 to shareholders of record at the close of business on August 25.

How have the estimates evolved since?

It turns out that revised estimates have trended downward over the past month.

VGM scores

Currently Sun Life has a low growth score of F, but its Momentum score is doing much better with a B. Charting a somewhat similar path, the stock received an A rating on the value side , which places it in the top quintile for this investment strategy.

Overall, the stock has an overall VGM score of B. If you’re not strategy-focused, this score is the one you should be interested in.

Outlook

Estimates have broadly trended downward for the stock, and the magnitude of these revisions has been net of zero. Notably, Sun Life has a rank 3 of Zacks (pending). We expect the stock to come back online in the coming months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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