Unum Group’s Industry Overhangs – Analyst Blog
Source: http://www.zacks.com/stock/news/14623/Unum+Group%27s+Industry+Overhangs+-+Analyst+BlogPosted on Tuesday, September 9th, 2008 | In Stocks to Watch
Unum Group’s (UNM) core 2Q08 results came in five cents ahead of our expectations.
UNM has improved its balance sheet risk through reserve strengthening, write-off of intangibles, and improved operating company capitalization level. Further, the company had nearly no exposure to subprime mortgages or CDO as of the end of 2Q08. We believe that the capital management strategy of the company will be accretive to shareholders value over time. However, industry overhangs lead us to expect somewhat limited upside potential for the shares presently.
Considering 2Q08 results and current company guidance, we are increasing our 2008 and 2009 earnings expectations to $2.55 per share and $2.75 per share, respectively, from $2.40 per share and $2.65 per share previously. Presently the shares are trading at a 4.2% P/E premium compared to peer median, though significantly below the historic high of P/E of 19.9x achieved during 1996 1998. At the current price, the shares of UNM trade at 1.15x the 2Q08 book value of $22.19 per share and 1.17x the adjusted book value $21.77 per share, or approximately at 34% discounts to the peer median level.
We believe the discount is justified by the company’s historical and ongoing sub-par ROE. We suspect that continued concerns for the financial service industry will continue to weigh on the shares over the near term. Our new six-month price target of $28.00 per share incorporates price-to-book multiple of 1.2x to our December 31, 2008 estimate of $23.35 per share. Thus, we continue to rate the shares of Unum as a Hold.
Read the full analyst report on UNM
“UNM” Free Stock Analysis: Buy? Sell? Hold?
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