Will This Downgrade Hurt AFLAC (AFL) Stock On Friday?

NEW YORK (TheStreet) -- AFLAC Inc. (AFL) was downgraded to "equal weight" from "overweight" at Barclays (BCS) on Friday as the firm believes the company's operating EPS growth through 2016 will be lower than the life insurance industry's median.

The firm lowered its price target on AFLAC to $67 from $78.

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Separately, TheStreet Ratings team rates AFLAC INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AFLAC INC (AFL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • AFL, with its decline in revenue, underperformed when compared the industry average of 8.1%. Since the same quarter one year prior, revenues slightly dropped by 9.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.31, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Insurance industry and the overall market, AFLAC INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • AFLAC INC's earnings per share declined by 15.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, AFLAC INC increased its bottom line by earning $6.75 versus $6.11 in the prior year. For the next year, the market is expecting a contraction of 7.6% in earnings ($6.24 versus $6.75).
  • You can view the full analysis from the report here: AFL Ratings Report
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