On Thursday, CFRA adjusted its rating on Scor SE (SCR:FP) (OTC: SCRYY), shifting from a Sell to a Hold stance, and increasing the price target to EUR 30.00, up from EUR 25.00. The revision comes after a thorough evaluation of the company's financial performance and market position. Scor's fourth quarter of 2023 adjusted net income reached EUR 179 million, a significant turnaround from the EUR 356 million loss reported in the same quarter the previous year.
The upgrade in rating and price target is based on multiple financial metrics. CFRA now values Scor at 0.6 times its comprehensive equity, which translates to a price-to-earnings (P/E) ratio of 6.5 times for the year 2024. This is below the peer average P/E ratio of 10.5 times, which CFRA justifies due to Scor's relatively lower return on equity (ROE). The firm also revised upwards its earnings per share (EPS) forecast for 2024 to EUR 4.60, up from EUR 4.40, and has set a 2025 EPS target at EUR 4.80.
The analyst's commentary highlighted the performance of Scor's Property & Casualty Reinsurance (P&C Re) division, which posted a combined ratio of 76%, a 23 percentage point improvement year-over-year, thanks to reserve releases and a favorable discount effect. This strong performance contributed to the company's overall results, which were in line with consensus estimates and exceeded CFRA's expectations by approximately 20%.
However, the Life & Health Reinsurance (L&H Re) division's result of EUR 64 million was noted to be 50% below consensus, impacted by onerous contracts. Despite this, an external review confirmed that Scor's P&C reserves exceed best estimate levels, which, according to CFRA, affirms the solidity of Scor's reserve practices.
The report also mentioned Scor's recent success in the January 2024 renewals compared to its peers. The company achieved a 14% increase in premium and an estimated 1.5 percentage point improvement in the underwriting ratio. These factors contributed to CFRA's decision to upgrade the stock's rating and price target.
InvestingPro Insights
Adding depth to the recent CFRA analysis, InvestingPro data provides a granular look at Scor SE's financial health. The company's market capitalization stands at a sturdy $5.65 billion, with a notably low price-to-earnings (P/E) ratio of 3.75 as of the last twelve months leading up to Q3 2023. This low earnings multiple may reflect what CFRA identified as Scor's lower return on equity compared to its peers.
Despite concerns over Scor's Life & Health Reinsurance division underperforming, the company is anticipated to see net income growth this year, an optimistic sign for investors. This aligns with CFRA's revised earnings per share forecasts and Scor's robust performance in the Property & Casualty Reinsurance sector. Moreover, the company's gross profit margin stands at 7.2%, which, while on the lower side, is mitigated by its liquid assets surpassing short-term obligations, suggesting financial resilience.
InvestingPro Tips indicate that Scor SE is not only expected to be profitable this year but has also been profitable over the last twelve months. This profitability, coupled with the company's status as a prominent player in the insurance industry, paints a picture of stability and potential growth. For readers looking to delve further into Scor SE's metrics and gain more insights, there are an additional 6 InvestingPro Tips available, which can be accessed with a special offer. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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