FTSE 100: Index falls as earnings results weigh; pound below $1.33, Bodycote soars
Tuesday, Equitable Holdings Inc (NYSE:EQH) received continued support from Evercore ISI, as the firm reiterated its Outperform rating and maintained the stock’s $69.00 price target. The target represents significant upside potential for the stock, which is currently trading near its 52-week high of $56.00 and has delivered an impressive 28.8% return over the past six months. According to InvestingPro analysis, the company appears fairly valued at current levels. Evercore ISI’s analysis suggests that the company’s recent actions regarding its AllianceBernstein (NYSE:AB) stake may be beneficial in the long term.
According to the firm, the lower take-up rate for the tender offer of Equitable Holdings’ AB stake could be seen as a positive development. It indicates the underlying value of the stake and reduces the strain on the company’s near-term cash flow. With a healthy current ratio of 1.49 and strong liquidity position, the company’s financial flexibility remains robust. This outcome is considered favorable due to a three-month mismatch between the tender offer and the closing of the RGA transaction.
Evercore ISI also noted that the expected use of proceeds from the $2.3 billion RGA deal could lead to more accretive earnings per share (EPS) if directed towards share repurchases. This strategic financial management is anticipated to benefit Equitable Holdings’ financial profile and shareholder value.
The research firm further pointed out Equitable Holdings’ cautious stance on mergers and acquisitions (M&A) in the current market, given the high private market valuations of smaller wealth management firms. Instead, the company appears to be focusing on organic growth within its wealth management business, leveraging the recent appointment of Sean George, formerly of AMP (OTC:AMLTF), to drive the hiring of experienced financial advisors (FAs).
Evercore ISI’s commentary underscores Equitable Holdings’ potential to enhance its higher multiple business segments through prudent capital allocation and strategic talent acquisition, without engaging in costly M&A activities. The firm’s maintained Outperform rating and price target reflects confidence in the company’s strategic direction and value proposition to investors.
In other recent news, Equitable Holdings reported mixed fourth-quarter 2024 results, with earnings per share meeting analyst expectations at $1.65, though revenue fell short at $3.62 billion compared to the expected $3.89 billion. The company saw its total assets under management rise by 10% year-over-year, reaching $1.02 trillion. Equitable Holdings also announced a reinsurance agreement with Reinsurance Group (NYSE:RGA) of America, generating over $2 billion in capital, which will be used to increase its stake in Alliance Bernstein. This move has led S&P Global Ratings to revise its outlook for Equitable Holdings to negative from stable due to increased financial leverage.
BMO Capital Markets raised its price target for Equitable Holdings to $72, citing improvements in free cash flow resulting from the reinsurance deal. Analyst Jack Matten from BMO highlighted the transaction’s positive impact on cash flow dynamics and earnings potential. Truist Securities also adjusted its price target to $60, reflecting a positive growth outlook for the company’s earnings per share and cash flow. Despite some adjustments to near-term EPS estimates, Truist Securities remains optimistic about Equitable Holdings’ long-term financial trajectory.
The company’s strategic decision to reinsure its individual life operations is seen as a step towards optimizing its business portfolio by focusing on more stable asset management operations. Equitable Holdings expects its 2025 non-GAAP operating EPS growth to align with its 12-15% target, with projected cash generation increasing to $1.6-1.7 billion. These developments highlight the company’s ongoing efforts to strengthen its financial position and enhance shareholder value.
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