On Wednesday, Keefe, Bruyette & Woods, a financial services specialist firm, raised its rating on shares of Jackson Financial Inc. (NYSE: NYSE:JXN) from Market Perform to Outperform. The firm has set a price target for the stock at $68.00, indicating a significant potential upside from its current trading level.
The upgrade comes after Jackson Financial provided guidance last week, projecting a stronger capital return for 2024, estimated between $550 million and $650 million. Additionally, the company forecasts robust ongoing free cash flow generation, anticipating more than $850 million.
The analyst from Keefe, Bruyette & Woods cited several factors contributing to the improved outlook for Jackson Financial. The establishment and funding of the Brooke Re captive, along with an increase in interest rate hedging, are expected to reduce capital volatility. These strategic moves should better align the company's financial management with economic risks.
Despite acknowledging the higher risk associated with Jackson Financial's focus on variable annuities, the analyst has factored in a 15% reduction to the company's free cash flow guidance. This conservative approach to valuation still leads to an attractive 2025 estimated free cash flow yield of 15%, which compares favorably to peers like BHF and LNC, which trade at 12-13% yields.
The revised price target represents a 35% potential upside for Jackson Financial's stock, including a 5% dividend yield. This substantial expected return has prompted the upgrade to Outperform, signaling confidence in the company's financial prospects and strategic initiatives.
InvestingPro Insights
Following the optimistic reassessment by Keefe, Bruyette & Woods, Jackson Financial Inc. (NYSE: JXN) has shown several positive indicators that may interest investors. The company's management has demonstrated confidence in its prospects by aggressively buying back shares, a move that can often signal a belief in undervalued stock. Adding to the allure for income-seeking investors, Jackson Financial has raised its dividend for three consecutive years, with a current dividend yield of 5.34%, which is notably higher than the average yield in the financial sector.
InvestingPro data highlights a compelling valuation metric for Jackson Financial, with an adjusted price-to-earnings (P/E) ratio for the last twelve months as of Q4 2023 standing at 4.59. This figure suggests that the company is trading at a lower earnings multiple compared to many of its peers. Additionally, despite a challenging revenue growth year-over-year, analysts anticipate sales growth in the current year, which could signal a turnaround for the company.
Investors considering Jackson Financial can also note that the stock has experienced a large price uptick over the last six months, with a total return of 55.81%. This momentum may intrigue those looking to capitalize on the stock's recent performance. For those interested in further insights, InvestingPro offers additional tips on Jackson Financial, including analysis on profitability and stock price volatility. To explore these insights in greater depth, investors can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, where 9 additional tips are listed for Jackson Financial.
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