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Aflac's Guidance Fails To Impress Analysts

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Aflac (NYSE: AFL) reported earnings after Tuesday's closing bell. Guidance range was lowered and also narrowed, forcing firms to lower their EPS and price targets.

Bank of America ($73 price target) lowered EPS estimates for 2015:

“Despite the earnings beat, Aflac narrowed its guidance range for 2014 constant currency EPS growth from 2%-5% to 3%-4%. If the Yen remains flat at 102 yen/dollar management's guidance suggests full year 2014 EPS of $6.25. Aflac expects to significantly increase spending in the 3Q and 4Q.

"We are maintaining our estimate of $6.25 for 2014, but lowering our estimate from $6.70 to $6.60 for 2015 and from $7.25 to $7.15 for 2016. Management highlighted at least $0.08 of annual expenses (1.3% of run-rate earnings) related to U.S. sales initiatives beginning in the 4Q. We now believe 2015 guidance will likely call for 4%-7% EPS growth.”

Morgan Stanley ($70 PT) advised clients to stay on the sidelines:

“However, the company appears to be continuing to struggle to regain lost momentum, with Japan sales now expected to be at the low end of their prior guidance, US sales expectations significantly cut, and with the EPS guidance range narrowed to a level below what we were previously expecting. Further, in 2015, it also appears the company will be incurring new costs related to sales initiatives that will further weigh on results. Against this, we find ourselves lowering again our expectations, and despite underperformance of the stock, we recommend investors to stay on the sidelines.”

Credit Suisse ($67 PT) lowered 2014 EPS estimate:

“While there are a lot of moving pieces beyond just sales-related initiatives, we note that the expectations that EPS will trend from a $1.66 level in 2Q to a 10-15% lower level in both 3Q and 4Q of 2014 does show directionally this trend. As such, we are lowering our 2014 estimate from $6.31 to $6.21.”

Aflac recently traded at $61.40, down 2.7 percent.

Posted-In: Bank of America Credit Suisse Morgan StanleyAnalyst Color Price Target


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