Unum (UNM) Rises 57% in a Year: Will the Bull Run Continue?
Shares of Unum Group UNM have rallied 57.2% in a year, outperforming the industry’s increase of 14.4%. The Finance sector and the Zacks S&P 500 composite have decreased 8% and 10.8%, respectively, in the same time frame. It has a market capitalization of $8.8. billion. The average volume of shares traded in the last three months was about 1.4 million.
Disciplined sales trends, strong persistency, an improving rate environment, favorable risk experience and a solid capital position continue to drive Unum’s shares.
Unum Group has a favorable VGM Score of A. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
The Zacks Consensus Estimate for 2023 has moved 2 cents north, while the same for 2024 has moved up by 1 cent in the past 30 days, reflecting analyst optimism.
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Can It Retain the Momentum?
The Zacks Consensus Estimate for 2023 earnings indicates an improvement of 3.7% from the year-ago reported figure on 2.6% higher revenues. The consensus estimate for 2024 earnings indicates an improvement of 4.8% from the year-ago reported figure on 3.3% higher revenues
The expected long-term earnings growth rate is pegged at 6.8%, outperforming the industry average of 5.9%. It estimates 45-55% growth in adjusted operating EPS by 2024.
Unum, carrying a Zacks Rank #2 (Buy), is the leading disability income writer and the second-largest writer of voluntary business in the United States. Solid operational performance, favorable benefits experience as well as solid top-line growth in the core businesses should continue to fuel growth and help UNM achieve its targeted growth. Management remains focused on moving on to a mix of businesses with higher growth and stable margins. This should help Unum Group’s premium from core business to increase 4-6% over the long term.
Unum U.S. continues to benefit from disciplined sales trends, strong persistency in group lines and growth of new product lines like dental and vision, which improve premium income. On the other hand, favorable risk results should aid Colonial Life. Notably, Unum U.S. and Colonial Life are two of the largest operating segments of Unum.
Insurers are direct beneficiaries of an improving interest rate environment. The Fed raised interest rates seven times in 2022 and once in 2023, with more on the horizon this year. At its December meeting, the Fed indicated taking the interest rate to 5.1% in 2023 to combat its expected 3.1% inflation. Thus, an improving interest rate environment should aid net investment income.
Its sustained solid operating results have been fueling a solid level of statutory earnings and capital, cushioning financial flexibility.
Banking on operational excellence, the insurer increased dividends at a nine-year CAGR (2014-2022) of 8%. The dividend yield is currently 3.3%, better than the industry average of 2.3%. UNM also has $200 million worth of share buyback authorization under its kitty for 2023.
Attractive Valuation
UNM shares are trading at a discount than the industry average. Its price-to-book value of 0.96X is lower than the industry average of 1.6X. Before the valuation expands, it is preferable to take a position in the stock.
Unum Group has an impressive Value Score of A. Value stocks have a long history of showing superior returns. Back-tested results have shown that stocks with a Growth Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offer better returns.
Other Stocks to Consider
Some other top-ranked stocks from the same space are AMERISAFE AMSF, Employers Holdings EIG and Aflac AFL.
AMERISAFE delivered a trailing four-quarter average earnings surprise of 26.19%. In the past year, AMSF has gained 16%.
The Zacks Consensus Estimate for AMSF’s 2023 and 2024 earnings has moved 12.2% and 4.2% north, respectively in the past seven days. AMSF sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Employers Holdings delivered a trailing four-quarter average earnings surprise of 26.87%. In the past year, EIG has gained 11.3%.
The Zacks Consensus Estimate for EIG’s 2023 and 2024 earnings has moved 3.3% and 4.6% north, respectively in the past seven days. Employers Holdings sports a Zacks Rank #1.
Aflac has a solid track record of beating earnings estimates in each of the last six quarters. In the past year, AFL has lgained 13.3%.
The Zacks Consensus Estimate for AFL’s 2023 and 2024 earnings has moved 2.9% and 1.9% north, respectively in the past 30 days. Aflac carries a Zacks Rank #2.
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Aflac Incorporated (AFL) : Free Stock Analysis Report
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Employers Holdings Inc (EIG) : Free Stock Analysis Report
