Keefe, Bruyette & Woods Upgrades Genworth Financial Inc.

Genworth Financial Inc. GNW was upgraded Sunday by Keefe, Bruyette & Woods from Market Perform to Outperform with price target lowered from $16.50 to $16.

Analysts led by Ryan Krueger based the change on an “overly discounted valuation and the view that long-term care risk, while very real over time, will not play out as badly as feared over the next couple of years.”

Krueger went on to note that he continued “to expect a $150-$350m 3Q14 claim reserve charge, likely reducing the LTC active life reserve margin, but not nearly enough to necessitate a loss recognition charge for the foreseeable future. With GNW down another 10 percent and trading at 52 percent of book and 7.2x 2016E EPS, we think the discount is now sufficiently compelling to own the shares.”

The firm values Genworth at “$16 using a SOTP approach, equaling 9.7x forward earnings and 0.64x forward book vs. 6.7 percent 2016E ROE. We estimate the market is currently ascribing a -$1/sh value to LTC.”

Genworth Financial Inc. recently traded at $12.73, up 1.11 percent.