On Wednesday, Piper Sandler adjusted its stock price target for Horace Mann Educators (NYSE:NYSE:HMN), increasing it to $42.00 from the previous $36.00 while maintaining a Neutral rating on the stock. The revision reflects an optimistic view on the company's earnings potential, despite a maintained stance on the stock's valuation.
The firm acknowledged improvements in Horace Mann's property and casualty (P&C) underwriting performance and noted better than expected earnings from the Supplemental & Group Benefits sector. However, the Life & Retirement segment continues to experience some elevated mortality rates, which are not expected to be a lasting issue.
Piper Sandler's decision to maintain a Neutral rating is primarily based on the company's valuation. Although Horace Mann has shown improved results following significant profitability measures, its return on equity (ROE) profile is still considerably lower compared to many of its peers. Moreover, the firm sees limited liability optionality for Horace Mann, despite the scarcity value typically associated with small to mid-cap companies.
The price target increase to $42 is justified by higher prospective earnings estimates and the adjustment of the 2025 earnings multiple from 10x to 11x. This change is based on management's comments regarding the achievement of rate adequacy in the property-casualty insurance business by 2025 and the reiteration of an expectation for a 10% adjusted ROE in the same year, suggesting potential upside to the current consensus.
In other recent news, Horace Mann Educators Corporation reported its second-quarter core earnings, posting a profit of 20 cents per share on a diluted basis, which aligned with market expectations. The company experienced a 9% increase in total revenues, attributed to an 8% rise in net premiums and contract deposits. Sales in property and casualty surged by 37%, while the supplemental and group benefit segment saw a 20% increase.
However, core earnings in the life and retirement segment decreased by 29% due to lower income from commercial mortgage loan funds and higher interest credited. Despite this, the fixed income portfolio with a credit rating of A plus performed well, exceeding expectations in the higher interest rate environment.
In other leadership changes, Ryan Greenier has been appointed as the new Executive Vice President and Chief Financial Officer, effective from October 1, 2024. Concurrently, Chief Operating Officer Stephen McAnena has taken over the company's Worksite division. These recent developments are part of Horace Mann's strategic vision and commitment to its stakeholders.
InvestingPro Insights
Horace Mann Educators (NYSE:HMN) has shown resilience and growth potential, aligning with Piper Sandler's optimistic price target revision. InvestingPro data reveals that HMN's revenue grew by 10.71% over the last twelve months as of Q3 2024, reaching $1.59 billion. This growth trend is further supported by a strong 17.57% price total return over the past three months.
InvestingPro Tips highlight that Horace Mann has raised its dividend for 14 consecutive years and maintained dividend payments for 33 consecutive years, demonstrating a commitment to shareholder returns. This is particularly relevant given the company's current dividend yield of 3.46%. Additionally, analysts predict the company will be profitable this year, which aligns with Piper Sandler's improved earnings outlook.
The company's P/E ratio of 15.38 (adjusted for the last twelve months as of Q3 2024) suggests a reasonable valuation, especially considering the expected earnings growth. This metric provides context to Piper Sandler's decision to maintain a Neutral rating while increasing the price target.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights on Horace Mann Educators. Currently, there are 5 more InvestingPro Tips available, providing a deeper understanding of the company's financial health and market position.
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