This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Analysts Love MetLife for 2014

NEW YORK (TheStreet) -- Even after an amazing run for the stock, most sell-side analysts continue to see plenty of upside for MetLife (MET - Get Report).  

The bull market has lifted all boats, but life insurers have outperformed dramatically.  The Dow Jones U.S. Life Insurance Index has risen 57% this year, compared to a 24% increase for the S&P 500 (^GSPC).  The life insurers have even outperformed banks, as the KBW Bank Bank Index has risen 30%.

MetLife's shares closed at $51.19 Thursday, returning 59% this year.  The shares trade for 1.1 times their reported Sept. 30 book value of $47.99, excluding other comprehensive income.  The share trade for 9.0 times the consensus 2014 earnings estimate of $5.71 a share, among analysts polled by Thomson Reuters, and for 8.3 times the consensus 2015 EPS estimate of $6.15.  Out of 23 sell-side analysts polled, 19 rate MetLife a "buy," while the remaining four analysts all have neutral ratings on the shares.

The company reported earnings available to common shareholders for the first three quarters of $2.369 billion, or $2.14 a share, increasing from $1.106 billion, or $1.03  share, during the first three quarters of 2012.  The earnings improvement reflected a $1.868 billion goodwill impairment on its U.S. annuities business. Operating earnings before taxes, investment and derivative gains and losses and various accounting adjustments for the first three quarters totaled $6.637 billion, increasing from $6.162 billion a year earlier, mainly reflecting an increase in fee income from universal life and investment products.

MetLife reported an operating return on common equity of 10.4% for the third quarter.  As part of its year-end investor presentation on Thursday, the company said it had made no major change in strategy, but that its operating return on equity was expected to improve to a range of 12% to 14% in 2016.

During a conference call with analysts on Thursday, MetLife resident William Wheeler said "We expect to build on this very strong year and are projecting solid growth in both revenue and earnings for 2014."

A very important market development for the company during 2014 will be the tapering of the Federal Reserve's "QE3" purchases of long-term U.S. Treasury bonds and agency mortgage-backed securities.  These purchases have been running at a net monthly pace of $85 billion since September 2012, and have been meant to hold long-term interest rates down.  In anticipation of the central bank's announcement of a gradual lowering of the bond purchases -- which could happen as early as next Wednesday following the Federal Open Market Committee's policy meeting -- investors have sent the yield for 10-year U.S. Treasury bonds to 2.87% from 1.70% at the end of April.

All insurers rely heavily on investment income, so the historically low interest-rate environment has been very difficult for life insurers.  MetLife's own assumptions are factoring in an increase in the yield on the 10-year bond to 3.36% at the end of 2014 and 4.50% "by the end of 2016."

Deutsche Bank analyst Yaron Kinar in a report on Nov. 14 wrote that U.S. life insurers since 1997 had traded at current valuation averages "when 12-
month forward yields [for 10-year U.S. Treasury Bonds] were in the 3.0-3.5% range."  Kinar added that "Current valuations imply a ~3% 10Y 12 months ahead, whereas the introduction of tapering by March '14 would likely mean that yields move into 3.5% territory or above, and expectations of further increases would rise."

On that basis, Kinar wrote that MetLife offered "the most upside" among life insurance stocks under his coverage.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
MET $38.81 0.00%
AAPL $94.02 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
TSLA $162.60 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs