Sun Life Financial Has Low Exposure To The Volatile Energy Sector And Could Pursue Acquisitions

Argus said it likes Sun Life Financial Inc's SLF relatively low investment exposure to the energy sector. The firm noted that the company reported strong second quarter results despite low interest rates and declining stock prices hurting its investment portfolio.

Fundamentals

Argus highlighted the company's strong balance sheet and its above-peer 3.8 percent dividend yield. Currency repatriation and turbulence at its investment holdings could render the earnings volatile, according to the firm. However, higher dividend yield can have an offsetting effect.

Argus noted improvement in Asia and the U.S. and its asset management business.

Valuation High But Justified

The firm noted that its target price of $37 assumes a multiple of 10.4 times its 2017 earnings per share estimate, which is above the multiples of its peer group. However, the firm said the higher valuation is justified, given Sun Life's industry-leading return on equity, operating revenue growth and expanding global operations.

The firm also believes the recent weakness could prompt the management to announce additional buybacks.