Should You Dump Manulife Financial (MFC) Stock Now?

On Aug 31, 2016, Zacks Investment Research downgraded Manulife Financial Corporation (NYSE:MFC) to a Zacks Rank #4 (Sell).

Why the Downgrade?

Manulife Financial has been witnessing downward estimate revisions after reporting disappointing second-quarter 2016 results. With respect to the surprise trend, the company delivered negative surprises in two of the last four quarters, with an average miss of 2.83%.

The life insurer’s second-quarter core earnings of $643.5 million (C$833 million) declined from the prior-year quarter, primarily due to the absence of core investment gains, higher-than-expected macro hedging costs and lower earnings on surplus assets. Also, the life insurer experienced lower sales at its U.S. and Canada divisions in the second quarter.

Manulife’s soft results from the U.S. division and low interest rates continue to hurt the overall performance. Core earnings at the U.S. division plunged 11% year over year, owing to an unfavorable policyholder experience in JH Long Term Care, the non-recurrence of favorable policy-related items from the year-ago quarter and lower new business gains in Insurance. Given the stiff competition and a continued low interest rate environment, earnings from this division are expected to remain under pressure in the near term.

Also, recent volatile global equity markets and low bond yields have been adversely affecting the company’s capital position.

The Zacks Consensus Estimate for 2016 moved down 3.5% to $1.36 per share over the last 30 days. For 2017, the same moved down 1.9% to $1.57 per share over the same time frame.

Zacks Rank and Stocks to Consider

Though we prefer to avoid Manulife Financial presently, some better-ranked stocks from the life insurance industry are Health Insurance Innovations, Inc. (NASDAQ:HIIQ) , Genworth Financial, Inc. (NYSE:GNW) and Primerica, Inc. (NYSE:PRI) . While Health Insurance Innovation sports a Zacks Rank #1 (Strong Buy), both Genworth Financial and Primerica hold a Zacks Rank #2 (Buy).

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