Credit Suisse wonders whether Metlife Inc MET has enough catalysts to meet high expectations as it started coverage of the insurer with Neutral rating and $51 target price.
Analyst John Nadel pointed out the following catalysts for Metlife:
1) "the separation of a portion of its U.S. Retail operations (to be called "Brighthouse Financial")";
2) "its court case challenging the Fed's designation of MET as a non-bank systemically important financial institution ("SIFI")"; and
3) "the likelihood that Brighthouse regulatory filings allow MET to return to the market to repurchase shares post quiet periods."
Nadel noted that investors overlooked the company's recently announced $1 billion expense initiative.
In addition, the separation details suggest Metlife should have incremental $2-$3 billion of capital flexibility over the Brighthouse spin in the first half of 2017. This reinforces the analyst's estimate of $2 billion of buybacks annually in 2017/18.
Nadel's $51 price target is based on a sum of the parts-driven 9.7x his 2017 estimated EPS of $5.84, or $56, less a 10 percent "SIFI discount" to incorporate regulatory risk.
At time of writing, shares of Metlife were down 0.32 percent to $47.
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