{"id":21047,"date":"2023-06-10T23:52:53","date_gmt":"2023-06-11T03:52:53","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/unum-stock-an-insurance-industry-standout-shares-remain-undervalued-nyseunm\/"},"modified":"2023-06-10T23:52:54","modified_gmt":"2023-06-11T03:52:54","slug":"unum-stock-an-insurance-industry-standout-shares-remain-undervalued-nyseunm","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=21047","title":{"rendered":"Unum Stock: An Insurance Industry Standout, Shares Remain Undervalued (NYSE:UNM)"},"content":{"rendered":"
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Insurance stocks were majors winners last year. 2023 has brought about a big trend change, though. The SPDR S&P Insurance ETF (KIE) has underperformed the S&P 500 by some 13 percentage points YTD, hallmarked by the March domestic regional banking crisis. The industry ETF took another relative leg lower in May as U.S. mega-caps dominated.<\/span><\/p>\n

There has not been much of a relief rally in KIE vs SPY, but I see upside potential in one of the clearest winners in insurance: Unum Group (NYSE:UNM<\/span>).<\/p>\n

Insurance Stocks Injured in 2023: Unum Bucks The Trend<\/h2>\n
\"Insurance<\/span> <\/picture>
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Stockcharts.com<\/span><\/p>\n<\/figcaption><\/figure>\n

According to Bank of America Global Research, UNUM, up 13% on the year, is a leading provider of disability income insurance and ranks among the world’s leading special risk insurers. Unum has a strong market share in the U.S. and U.K. Unum has a large legacy book of long-term care (LTC) and individual disability but has put these businesses in runoff. The company distributes via captive sales representatives, brokers, and sales consultants.<\/span><\/p>\n

The Tennessee-based $9.0 billion market cap Insurance industry company within the Financials sector trades at a low 6.5 trailing 12-month GAAP price-to-earnings ratio and pays a 2.9% dividend yield, according to The Wall Street Journal.<\/span><\/p>\n

In early May, Unum <\/span>reported<\/span> a solid EPS beat. With Q1 EPS of $1.87, earnings were better than expected while the insurer missed just modestly on revenue. Helping the stock, however, was management\u2019s full-year 2023 <\/span>guidance increase<\/span>. After-tax adjusted operating income per share is now seen in the +20% to +25% range, up substantially from its prior +8% to +12% range. <\/span><\/p>\n

Better than forecast results in its Group Disability and Supplemental & Voluntary segments drove profits. While interest rate sensitivity is a risk the Group Disability segment continues to deliver upside results while its valuation is attractive. In another bullish signal to the market, UNM <\/span>raised its dividend<\/span> by more than 10% just a few weeks ago.<\/span><\/p>\n

Speaking of <\/span>valuation<\/span>, analysts at BofA see EPS troughing near $6 this year. Per-share profits are then forecast to <\/span>rise<\/span> at a respectable rate in 2024. The Bloomberg consensus forecast is slightly more optimistic compared to the BofA projection. Dividends, meanwhile, are expected to rise to $1.44 despite some earnings volatility over the coming quarters. With a price-to-earnings multiple at exceptionally low levels considering upcoming EPS growth, I remain bullish on Unum. Investors are paid to wait given the roughly 3% yield, too.<\/span><\/p>\n

Unum: Earnings, Valuation, Dividend Forecasts<\/h2>\n
\"Unum:<\/span> <\/picture>
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BofA Global Research<\/span><\/p>\n<\/figcaption><\/figure>\n

While UNM trades near its 5-year average forward P\/E and PEG, those are at steep discounts to the sector medians. I assert that the firm warrants a multiple closer to that of the sector, so if we apply an 8 P\/E and $7 of next-12-month EPS, then shares should trade near $56. Perhaps you could discount that slightly based on UNM\u2019s P\/E ratio history, but I like the outlook.<\/span><\/p>\n

UNM: Strong Valuation Metrics<\/h2>\n
\"UNM: <\/picture>
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Seeking Alpha<\/span><\/p>\n<\/figcaption><\/figure>\n

Looking ahead, corporate event data provided by Wall Street Horizon an unconfirmed Q2 2023 earnings date of Tuesday, August 1 AMC. Before that volatility catalyst, Rick McKenney, President, CEO, and Steve Zabel, EVP, CFO, are slated to present at the Morgan Stanley 14th Annual US Financials Payments & CRE Conference 2023 in New York City from June 12 to 14.<\/span><\/p>\n

Corporate Event Risk Calendar<\/h2>\n
\"Corporate<\/span> <\/picture>
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Wall Street Horizon<\/span><\/p>\n<\/figcaption><\/figure>\n

The Options Angle<\/span><\/h2>\n

Digging into the Q2 earnings report and its expectations, data from Option Research & Technology Services (ORATS) show a consensus EPS forecast of $1.85 which would be a 3% drop from $1.91 of per-share profits earned in the same quarter a year ago. Unum has topped analysts\u2019 expectations in five of the past six quarters, and the stock price has rallied post-earnings in six of the last seven instances. So, those are bullish historical trends.<\/span><\/p>\n

This time around, the options market has priced in a modest 5.3% earnings-related stock price swing when analyzing the at-the-money straddle expiring soonest after the August report. Implied volatility is low right now \u2013 just 26% per ORATS \u2013 and shares have not budged much after earnings in the last three quarters, so going long the straddle here is not worthwhile in my view.<\/span><\/p>\n

UNM: Positive Earnings Reaction History<\/h2>\n
\"UNM:<\/span> <\/picture>
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ORATS<\/span><\/p>\n<\/figcaption><\/figure>\n

The Technical Take<\/span><\/h2>\n

UNM faked out investors around the regional banking crisis earlier this year. Notice in the chart below that shares broke down through $39 to fall under the rising 200-day moving average. An old gap from 2022 was not filled, however, and the bulls took the stock to all-time highs, albeit by a small margin, a few weeks ago. <\/span><\/p>\n

Thus, the $46 to $47 range is key for UNM to bust through. A rally above that resistance zone would portend a measured move price target to about $57 based on the $10 range over the last 10 months. Long here with an expectation of a breakout above $47 looks good. Also notice how the long-term 200-day moving average is upward-sloping, further indicating that the bulls are in charge.<\/span><\/p>\n

UNM: Eyes On A Bullish Upside Breakout<\/h2>\n
\"UNM:<\/span> <\/picture>
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Stockcharts.com<\/span><\/p>\n<\/figcaption><\/figure>\n

The Bottom Line<\/span><\/h2>\n

I reiterate my buy rating on Unum. The stock remains undervalued while the technical setup appears poised for an all-time high before long.<\/span><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Insurance stocks were majors winners last year. 2023 has brought about a big trend change, though. The SPDR S&P Insurance ETF (KIE) has underperformed the S&P 500 by some 13 percentage points YTD, hallmarked by the March domestic regional banking crisis. The industry ETF took another relative leg lower in May as U.S. mega-caps dominated. […]<\/p>\n","protected":false},"author":1,"featured_media":13539,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-21047","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nUnum Stock: An Insurance Industry Standout, Shares Remain Undervalued (NYSE:UNM) | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Insurance stocks were majors winners last year. 2023 has brought about a big trend change, though. 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