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KBW Analysts Update The Bull/Bear Case For Genworth

KBW Analysts Update The Bull/Bear Case For Genworth

Keefe, Bruyette & Woods analyzed the bull and bear cases for Genworth Financial Inc (NYSE: GNW) after the stock gained due to its second-quarter EPS beat. However, the analysts maintain its Market Perform rating and $3.5 target price on the stock.

The brokerage listed six points in favor of a bull case:

    1. Ownership transfer of GLAIC.
    2. Divestment of GLAIC for $2 billion.
    3. Expectation that 50–75 percent of the estimated $1.0billion–$1.5 billion sale proceeds to holding company.
    4. Estimated $0.5 billion–$1.0 billion sale proceeds going in favor of GLIC subsidiary.
    5. Spinning off GLIC to shareholders.
    6. Debt payment of $1.5 billion–$2.0 billion thereby achieving its targeted level.

Related Link: Discover Financial's Focus On Prudent Growth Is Paying Off

"Valuing the mortgage insurance businesses at 5–10 percent premiums to current levels puts Canada at $2.90, Australia at $1.25, and the U.S. at $4.65 (9x2017E), totaling $8.80. $1.0–$1.5 billion of assumed life/annuity proceeds to the holdco equals $2–3. From this we subtract $5.70 of existing net holdco debt and arrive at a $5–$6 total value in this bull-case scenario," the lead analyst told clients in a research note.

In a bear case, the brokerage cited $20 billion LTC reserves that have the potential for downside risk due to continuous deterioration in claims and low interest rates. The company faces debt maturities in the years 2018, 2020 and 2020 that needed cash flow.

At time of writing, the stock lost $0.05, or 1.06 percent, to $4.68.

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Latest Ratings for GNW

Jun 2018MaintainsMarket PerformMarket Perform
Nov 2016UpgradesNeutralBuy
Oct 2016DowngradesBuyNeutral

View More Analyst Ratings for GNW
View the Latest Analyst Ratings

Posted-In: Keefe Bruyette & WoodsEarnings Price Target Reiteration Analyst Ratings Trading Ideas General Best of Benzinga


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