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On Tuesday, Citi updated its stance on Scor (EPA:SCOR) SE (SCR:FP) (OTC: SCRYY) stock, increasing the price target to EUR24.40, up from the previous EUR21.40. The firm maintained a Neutral rating on the stock. The revision follows the third-quarter results and the completion of the Life & Health Reinsurance (L&H Re) reserve review.
Citi's analyst has adjusted the financial model for Scor SE, leading to a significant change in the net income forecast for 2024. Previously expected to post a profit of €121 million, the company is now projected to incur a loss of €49 million.
However, the outlook for 2025 and 2026 is more positive, with net income estimates increased by 5-6%. Additionally, Citi has introduced its financial estimates for the year 2027.
The improved financial projections are attributed to a stronger underlying combined ratio (COR), which was reported to be approximately 78% at the nine-month mark of 2024. The analyst expects the reserve buffer build for Scor SE to be completed ahead of schedule. As a result, headline COR estimates for 2025 to 2027 have been adjusted to around 85-86%.
Scor SE's stock is currently trading at 5.4 times the estimated earnings per share (EPS) for 2025. The increase in the price target by 14% reflects anticipated higher earnings and a reduced discount rate in L&H Re following the reserve review. Scor SE is scheduled to hold its Capital Markets Day on December 12, where it is anticipated that the company will update its targets.
In other recent news, Berenberg upgraded Scor SE's stock rating from Hold to Buy, attributing this change to the company's Property & Casualty (P&C) strength and life charge clarity. The firm also increased the price target to €24.00, up from the previous €20.00, indicating a positive outlook for the stock's future performance.
This upgrade was driven by a milder than expected hurricane season in Q3 2024, which Berenberg anticipates will bolster Scor's P&C reserves and enhance its financial buffers.
On the other hand, both Citi and HSBC recently downgraded Scor SE due to concerns over earnings and potential solvency challenges. Citi revised its rating from Buy to Neutral and adjusted its price target to EUR21.40, while HSBC downgraded Scor SE from a Buy to a Hold status, reducing the price target to €33.
These changes reflect concerns over potential unexpected losses in property and casualty reinsurance, adverse trends in longevity, particularly within the U.S. mortality segment, and possible changes to the solvency model.
These recent developments present a mixed picture for Scor SE, with Berenberg expressing confidence in the company's financial resilience and prospects for shareholder returns, while Citi and HSBC have expressed reservations about the stock's future performance. As Scor SE navigates these challenges, it's expected that these issues will continue to influence the company's earnings.
InvestingPro Insights
Recent data from InvestingPro adds depth to Citi's analysis of Scor SE. The company's market capitalization stands at $4.58 billion, with a price-to-book ratio of 1.0, indicating that the stock is trading close to its book value. This aligns with Citi's Neutral rating and suggests a balanced market valuation.
InvestingPro Tips highlight that Scor SE pays a significant dividend to shareholders, with a current dividend yield of 5.52%. This could be attractive to income-focused investors, especially considering the 35.55% dividend growth over the last twelve months. However, it's worth noting that the company was not profitable over the last twelve months, which may raise questions about the sustainability of dividend payments.
The stock has shown strong recent performance, with a 25% return over the last three months and a 19.16% return in the past week. This positive momentum could be related to the anticipated updates at the upcoming Capital Markets Day on December 12, as mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Scor SE, providing a broader perspective on the company's financial health and market position.
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