Great-West Lifeco target raised to Cdn$59 by BMO Capital

On Thursday, BMO Capital Markets adjusted its outlook on Great-West Lifeco Inc (TSX:GWO:CN) (OTC: GWLIF), raising the firm’s price target to Cdn$59.00, up from the previous Cdn$54.00, while maintaining a Market Perform rating on the stock. The revision follows Great-West Lifeco’s Investor Day, where the company presented several key updates.

Analysts at BMO Capital highlighted the company’s new increased base return on equity (ROE) target, which has been set at 19%+, an increase from the former 16-17%. Additionally, Great-West Lifeco aims to maintain its base 8-10% earnings per share (EPS) growth target and has introduced a new goal of generating 80% of base EPS in capital.

The price target increase reflects BMO Capital’s updated valuation multiples. The firm now applies an 11x multiple on the projected 2026 base EPS and a 2.0x multiple on the forecasted first quarter of 2026 base ROE. This change is in response to the company’s heightened ROE goal and is supported by Great-West Lifeco’s sector-leading 4.2% dividend yield.

During the Investor Day, Great-West Lifeco also outlined the growth drivers for its various segments. The company’s Empower segment is targeting "double-digit" growth, which is more ambitious than the "mid-single" growth targets set for its other segments. BMO Capital’s analysis suggests that these growth drivers were well articulated, although the firm notes that the market has largely anticipated these strategic goals.

In conclusion, BMO Capital’s updated price target for Great-West Lifeco takes into account the company’s strategic targets and performance indicators, which were shared with investors during the recent Investor Day event. The firm’s Market Perform rating remains unchanged as these developments were expected and are believed to be already factored into the current market valuation.

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