Jefferies upgrades Brighthouse Financial stock on strategic positioning

Published 10/07/2024, 11:10
Jefferies upgrades Brighthouse Financial stock on strategic positioning

On Wednesday, Jefferies made a favorable adjustment to its stance on Brighthouse Financial , Inc. (NASDAQ:BHF) stock, shifting the rating from Hold to Buy and increasing the price target to $54.00 from the previous $49.00.

This upgrade marks a significant shift in the firm's view on the insurer, as it is the first time Jefferies has given Brighthouse a Buy rating since it began covering the stock in 2017 following its spin-off from MetLife (NYSE:MET).

The analyst cited several reasons for the upgrade, emphasizing Brighthouse's strategic positioning, which aligns with Jefferies' Duration at Spread (DAS) and Return on Required (RoR) investment theses. Additionally, the stock's low price-to-earnings (P/E) ratio was highlighted as an attractive feature for investors.

The firm also expressed confidence in Brighthouse's ability to meet consensus expectations for stock buybacks over the coming years. This outlook is maintained even with minimal dividends expected from Brighthouse Life Insurance Company (BLIC), a subsidiary of Brighthouse Financial.

Furthermore, Jefferies pointed out the potential for Brighthouse Financial in the market, as it remains one of the few large annuity providers without a clear private equity partnership. Moreover, the company's above-peer level of holding company liquidity relative to its market capitalization was noted as a factor that could catch the interest of activist investors.

The upgrade comes at a time when Brighthouse Financial continues to navigate the financial landscape post its split from MetLife, with Jefferies' new rating indicating a positive outlook on the company's prospects. The new price target of $54.00 represents a notable increase from the prior target, reflecting Jefferies' revised expectations for the insurer's financial performance.

In other recent news, Brighthouse Financial, Inc. has seen a mix of developments. The company's stock rating was upgraded from Underperform to Market Perform by Keefe, Bruyette & Woods, albeit with a slightly reduced price target of $47.00. This decision was influenced by the company's efforts to improve its business mix and fortify its legacy variable annuity hedging strategies.

Despite facing challenges such as concerns over capital generation and the unpredictability of ongoing free cash flow trends, Brighthouse Financial reported steady growth in the first quarter of 2024.

This includes a solid risk-based capital ratio, significant growth in its SHIELD annuity product suite, and a 26% increase in life insurance sales. The company also repurchased $62 million of common stock during this period.

However, Piper Sandler reduced the company's stock price target from $55.00 to $50.00 due to concerns about earnings. This was influenced by a lack of a definitive timeline for distributable earnings scenarios, a projected decline in fixed annuity sales, and increased competition in the registered indexed linked annuity (RILA) market. Despite these challenges, Brighthouse Financial continues to navigate the evolving annuity landscape.

InvestingPro Insights

In light of Jefferies' upgrade of Brighthouse Financial, Inc. (NASDAQ:BHF), current data from InvestingPro provides additional context for investors considering the insurer's stock. With a Market Cap of approximately $2.72 billion and a P/E Ratio that reflects challenges at -2.35, the company's valuation metrics are complex. The adjusted P/E Ratio for the last twelve months as of Q1 2024 slightly improves to -2.25, indicating potential shifts in the company's earnings landscape.

InvestingPro Tips suggest that Brighthouse's management has been actively buying back shares, which aligns with Jefferies' expectation for stock buybacks. Additionally, while the company has not been profitable over the last twelve months, analysts predict profitability this year, providing a potentially brighter outlook for investors. It's also noteworthy that Brighthouse does not pay a dividend, which may influence investment strategies focused on income.

For those seeking more in-depth analysis, there are 7 additional InvestingPro Tips available, which can be accessed by visiting https://www.investing.com/pro/BHF. To enhance your investment research experience, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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