Unum Group stock target raised to $102 at BMO Capital

On Monday, BMO Capital Markets increased its price target for Unum Group (NYSE:UNM) shares from $95.00 to $102.00, while maintaining an Outperform rating. The adjustment follows a significant transaction that has impacted the company’s financial position. The stock, currently trading at $82.29, has demonstrated remarkable strength with a 71.5% return over the past year and is approaching its 52-week high of $83.96. According to InvestingPro analysis, the stock’s technical indicators suggest it’s in overbought territory.

The firm’s analyst highlighted that Unum Group’s excess capital is now estimated to be greater than $4 billion. This figure notably surpasses the estimated negative value of Unum’s remaining long-term care (LTC) block. The analyst pointed out that the negative $680 million LTC ceding commission paid, along with Monday’s stock price movement, indicates the market values the remaining LTC business at approximately negative $3.5 to $3.0 billion, which is less than Unum’s excess capital position. The company’s strong financial position is reflected in its "GREAT" financial health score from InvestingPro, with liquid assets significantly exceeding short-term obligations and a conservative debt-to-equity ratio of 0.35.

The price target increase to $102 reflects an approximate 10% improvement in the volatility score within the firm’s free cash flow (FCF) framework. This improvement is factored in net of an initial 2% earnings per share (EPS) dilution, which results from the inclusion of a profitable individual disability block in the recent transaction.

Unum Group’s strategic movements and the subsequent financial analysis by BMO Capital Markets suggest a stronger than previously estimated financial outlook for the company. The revised price target of $102 takes into account the changes in the company’s capital structure and earnings potential post-transaction.

The market’s response to these developments, as seen in Unum Group’s stock price movement on Monday, aligns with the analyst’s evaluation of the company’s ongoing adjustments to its LTC business and overall capital strategy. This reassessment by BMO Capital Markets reflects confidence in Unum Group’s financial health and its ability to manage its LTC liabilities effectively.

In other recent news, Unum Group reported fourth-quarter earnings and revenue that fell short of analyst expectations. The company posted adjusted earnings per share of $2.03, missing the consensus estimate of $2.14, while revenue reached $3.24 billion, below the anticipated $3.29 billion. Despite this, Unum’s premium income increased by 3.1% year-over-year to $2.63 billion, and net investment income rose by 2.4% to $543.6 million. Truist Securities has raised its price target for Unum Group to $90, maintaining a Buy rating due to expectations of continued revenue growth and profitability. Meanwhile, Keefe, Bruyette & Woods increased the price target to $103, citing positive developments in Unum’s long-term care business and strategic capital management. Unum has also announced a new $1 billion stock buyback program, set to begin in April 2025, following the termination of the current program. The board has authorized various methods for repurchasing shares, with discretion over timing and volume based on market conditions. These developments highlight Unum Group’s ongoing strategies to enhance shareholder value and navigate market challenges.

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