Will This Downgrade Affect Aflac (AFL) Stock Today?

NEW YORK (TheStreet) -- Shares of Aflac Inc  (AFL) are lower by 1.33% to $58.74 in early market trading Friday, after the company was downgraded to "neutral" from "buy" by analysts at Bank of America/Merrill Lynch this morning.

Bank of America/Merrill Lynch analysts also lowered its price target to $66 from $73.

The firm cited the Columbus, GA-based company's disappointing growth guidance, as well as continued yen currency weakness for its cut in rating.

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Aflac is a holding company and oversees the operations of its subsidiaries in supplemental health and life insurance, operating in the U.S. and Japan.

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

"We rate AFLAC INC (AFL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, attractive valuation levels, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

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

  • Although AFL's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average.
  • AFLAC INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern 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 8.6% in earnings ($6.17 versus $6.75).
  • AFL, with its decline in revenue, underperformed when compared the industry average of 20.5%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Insurance industry average. The net income increased by 0.6% when compared to the same quarter one year prior, going from $702.00 million to $706.00 million.
  • You can view the full analysis from the report here: AFL Ratings Report

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