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On Tuesday, BMO Capital Markets adjusted its outlook on Equitable Holdings Inc (NYSE:EQH), increasing the price target to $72.00 from the previous $69.00. The firm continues to recommend the stock with an Outperform rating. The company, currently valued at $16.5 billion, has demonstrated strong momentum with a 56% return over the past year. According to InvestingPro analysis, the stock appears to be trading below its Fair Value, with analyst targets ranging from $49 to $72. BMO’s analyst Jack Matten believes that the company’s recent reinsurance deal with RGA, which is not covered by BMO, will further enhance Equitable Holdings’ free cash flow (FCF) profile.
Matten notes that the transaction involves most of Equitable Holdings’ individual life business and is expected to accelerate the improvement of its FCF profile. This comes as the company shifts away from a segment characterized by lower FCF conversion and higher volatility. The analyst also points out that the proceeds from this deal, which are over $2 billion, will be used predominantly to expand the earnings contribution from Equitable Holdings’ capital-light asset management operations, specifically mentioning AllianceBernstein (NYSE:AB). The company’s strong financial position is evident in its impressive revenue growth of 18.3% and healthy current ratio of 26.5. InvestingPro subscribers can access 8 additional key insights about EQH’s financial health and growth prospects.
The financial implications of the reinsurance transaction are significant for Equitable Holdings, leading to an approximate 2% increase in BMO’s 2026 earnings per share (EPS) estimate for the company, now set at $8.78. The optimism reflected in the revised price target is rooted in the expected positive impact on the company’s cash flow dynamics and earnings potential.
Equitable Holdings’ strategic decision to reinsure its individual life operations is seen as a move to optimize its business portfolio. By divesting from a less lucrative and more volatile insurance business, the company is poised to strengthen its position in the more stable and profitable asset management sector.
The analyst’s remarks highlight the potential for Equitable Holdings to benefit from the reallocation of capital towards its asset management business, which is anticipated to contribute to a more robust financial performance in the coming years. Management’s confidence is reflected in aggressive share buybacks and a consistent dividend growth track record, having raised dividends for 7 consecutive years. The company maintains a healthy dividend yield of 1.8% and has achieved a strong return on equity of 211%. Discover comprehensive analysis and detailed metrics in the Pro Research Report, available exclusively on InvestingPro.
In other recent news, Equitable Holdings reported mixed fourth-quarter results for 2024. The company achieved adjusted earnings per share of $1.65, meeting analyst expectations, but its revenue of $3.62 billion fell short of the anticipated $3.89 billion. Total (EPA:TTEF) assets under management and administration grew by 10% year-over-year, reaching $1.02 trillion as of December 31, 2024. Equitable Holdings also reported record full-year net inflows of $7.1 billion in its Retirement businesses and $4.0 billion in Wealth Management, with Asset Management seeing active net inflows of $4.3 billion.
Additionally, Truist Securities recently updated its analysis of Equitable Holdings, raising the price target to $60 from $52 while maintaining a Buy rating. This adjustment reflects expectations for continued growth in earnings per share and cash flow, despite a slight reduction in the 2025 EPS forecast to $7.00 from $7.15. Truist Securities has also initiated a 2026 EPS estimate of $8.00 for the company. The firm’s valuation of Equitable Holdings takes into account its ownership in AllianceBernstein and the rest of the company, leading to a comprehensive valuation of $18.0 billion. These recent developments highlight Equitable Holdings’ strategic moves and market performance, supporting sustained earnings and cash flow growth.
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