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UPDATE: Compass Point Reiterates On Genworth Financial As Market Fears LTC Reserve Charge

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In a report published Thursday, Compass Point analyst Ken Billingsley reiterated a Buy rating on Genworth Financial (NYSE: GNW), but lowered the price target from $23.00 to $16.50.

In the report, Compass Point noted, “The fear of a review of Long-Term Care (LTC) reserves pushed shares of GNW down 14% yesterday following the release of earnings. Despite decent performance out of the company's other operations, the fear of a LTC reserve charge will likely hang over the stock throughout the remainder of the quarter. Management expects to provide an update prior to 3Q14 earnings, but until then investors will continue to speculate as to how large a reserve charge may be needed, and what impact this will have to earnings and book value.

"We have made assumptions regarding various reserve charges, and even at the high end of our reserve charge estimates, we believe shares of GNW have been oversold. Volatility within reserves is normal, what is not normal is a company initiating a reserve review on one quarter of abnormal results. This could keep some investors away until more clarity develops. We have lowered our price target to account for the implied fear factor currently in the stock. If the reserve review turns up no issues, we could see shares trade up to $18 or higher, which is 75% of our 2015E TBVPS (ex-AOCI) of $24.08.”

Genworth Financial closed on Wednesday at $13.98.

Latest Ratings for GNW

DateFirmActionFromTo
Dec 2014Compass PointMaintainsNeutral
Nov 2014Raymond JamesUpgradesMarket PerformOutperform
Nov 2014Compass PointMaintainsNeutral

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