On Friday, Morgan Stanley adjusted its stance on Brighthouse Financial , Inc. (NASDAQ:BHF), moving the stock from an Equalweight to an Underweight rating. The firm cited concerns over the company's position compared to its peer, Equitable Holdings (NYSE:EQH), particularly in the current macroeconomic climate.
According to Morgan Stanley, Brighthouse faces a lengthier journey towards capital returns and earnings growth when contrasted with Equitable. While acknowledging Brighthouse's efforts to navigate its challenges, the firm sees Equitable as better positioned to generate superior earnings and capital returns in the variable annuity carriers sector.
The valuation of Brighthouse was another point of discussion. The stock is trading at a slight discount compared to Equitable, once the impact of AllianceBernstein (NYSE:AB) is excluded. However, Morgan Stanley suggests that Equitable's financial metrics, including earnings power and cash flow conversion, are expected to outpace those of Brighthouse over the long term.
Morgan Stanley maintained its Overweight rating on Equitable, reflecting a positive outlook on the company's performance relative to Brighthouse. The firm anticipates that Equitable's market multiples will gradually increase in comparison to Brighthouse, as the former continues to deliver stronger financial results.
This downgrade reflects Morgan Stanley's analysis and projections regarding the future performance of Brighthouse Financial in relation to its industry peer, Equitable Holdings. It underscores the importance of earnings generation and capital return potential as key factors in the firm's assessment of the two companies' stock ratings.
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