5 Factors That Make Aflac (AFL) An Attractive Bet For Now

Aflac Inc. (NYSE:AFL) is in a favorable position given its improving operating backdrop, rising rate environment, expected benefit from the recently implemented tax bill and strong domestic economy.

It’s a good idea to add stocks with robust fundamentals and long-term growth opportunities to your portfolio at the current level. Aflac is one such stock that has been witnessing upward estimate revisions, which reflects analysts’ optimism about its future prospects. Over the last 60 days, the Zacks Consensus Estimate for 2017 and 2018 rose 5.2% and 2.2%, respectively.

Further, shares of this Zacks Rank #2 (Buy) company have gained around 27% in a year’s time, outperforming the industry’s 20.6% rally.

5 Reasons Why Aflac Looks Attractive

Strong 2018 Guidance: Following impressive earnings in 2017, the company provided a strong outlook for 2018. It projects earnings per share between $7.45 and $7.75, the mid-point of which translates into year-over-year growth of 11.6%.A favorable guidance against persistent challenges in its Japan business raises investors’ confidence.

Earnings Strength: Aflac witnessed earnings per share growth in 2017 and 2016, despite facing weakness in its Japan business and stiff competition. The ongoing deconversion of the company’s Japan subsidiary, strong U.S. business and disciplined capital management should buoy earnings in the coming quarters.

Strong US Segment: Aflac U.S. continues to perform favorably, evident from revenue increase since 2010 (CAGR of 3.1% from 2010-2016) which continued through 2017 (total revenues rose 2%). The company has undertaken a number of growth initiatives in this segment which will drive top line growth. In 2018, it expectsnew annualized premium growth in the range of 3% to 5%, resulting in 2% to 3% growth in earned premium.

Tax Reform Impact: Aflac will invest $250 million in different areas such as employee welfare and business growth as well as provide support for childhood cancer initiatives. This development follows the recent passage of the tax reform by Donald Trump, which cuts the corporate tax rate to 21% from 35%. Per management, this easy tax regime provides an opportunity to make investments that will further drive business growth.

Strong Capital Position: Aflac has strong risk-adjusted capital at its operating subsidiaries supported by consistent earnings and good liquidity. The company has an impressive capital management strategy in place. It has been increasing dividend for the past 36 years. The company expects to repurchase shares in the range of $1.1 million to $1.4 billion and deploy approximately $2.1 billion to $2.4 billion of capital in 2018. Leverage ratio of 17.7% as of Dec 31, 2017, is below the lower end of its target range of 20-25%.

Other Stocks to Consider

Kemper Corp. (NYSE:KMPR) , sporting a Zacks Rank #1 (Strong Buy), has been witnessing upward estimate revisions for the past 30 days. Also, the company has surpassed estimates in each of the four quarters with an average positive surprise of 121.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

CNO Financial Group, Inc. (NYSE:CNO) has been witnessing upward estimate revisions for the past 60 days. Also, the company has surpassed estimates in each of the four quarters with an average positive surprise of 23.9%. It carries the same Zacks Rank as Aflac.

FBL Financial Group, Inc. (NYSE:FFG) has been witnessing upward estimate revisions for the last 60 days. The company beat earnings estimates in two of the four quarters with an average positive surprise of 1.54%. It carries a Zacks Rank of 2.

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