Voya Financial maintains stock target despite earnings miss

On Tuesday, Voya Financial (NYSE:VOYA) received a continued Overweight rating from Piper Sandler, with a steady price target of $86.00.

The firm's assessment follows Voya's pre-announcement of alternative investment income and pre-payment fees, which are expected to fall short of long-term goals by $7 to $18 million before taxes, after accounting for variable and incentive compensation. This shortfall, while an improvement from the first quarter of 2024, indicates ongoing challenges in the sector.

Voya Financial disclosed on Monday, after market close, that its alternative investment income and pre-payment fees for the second quarter of 2024 are estimated to be approximately $36 to $48 million pre-tax. This figure is below the company's long-term expectation of a 9% annual return. At the mid-point, the shortfall of $12.5 million is less than the first quarter's deficit, signaling a slight sequential improvement.

The underperformance in alternative investment income has led Piper Sandler to adjust its second-quarter earnings per share (EPS) estimate for Voya Financial down to $2.12 from $2.16, a $0.04 decrease.

This revised estimate still falls below the current consensus of $2.20. The continued headwinds in alternative investment income suggest that the path to normalization for the industry may be extended, particularly in light of the current commercial real estate cycle.

Despite these headwinds, Piper Sandler's reiteration of the Overweight rating and price target reflects a consistent view on Voya Financial's stock. The firm's analysis points to a gradual recovery from the lows observed in the fourth quarter of 2023, although the timeline for a full industry recovery remains uncertain.

The second quarter's earnings season for life insurance companies is just beginning, and Voya's pre-announcement serves as an early indicator of the sector's performance.

In other recent news, Voya Financial reported a 23% year-over-year increase in adjusted operating earnings per share (EPS) to $1.77 for Q1 2024. The company is on track to meet its full-year EPS target range of $8.25 to $8.45, driven by positive net inflows and strong sales momentum in retirement and group benefits segments.

Voya also announced a new $500 million share repurchase authorization, demonstrating its commitment to returning $800 million of excess capital to shareholders within the year. However, Voya noted a decline in revenue yields in the Investment Management sector due to a mix shift.

Piper Sandler reiterated its Overweight rating on Voya Financial, maintaining a steady price target of $86.00. The firm highlighted potential areas for improvement in Voya's various business segments that could increase earnings estimates over time.

Piper Sandler anticipates that Voya will benefit from increased spread income primarily driven by asset growth. The firm also described Voya's valuation as attractive, especially considering the increasing number of company-specific catalysts.

These recent developments reflect Voya's strategic focus on workplace strategy and investment management. The company's expansion into lower deductible levels in its stop-loss business is expected to contribute to sales growth.

InvestingPro Insights

As Voya Financial navigates through the challenges of the current financial landscape, the company's strategic financial management is noteworthy. An InvestingPro Tip highlights that Voya has been aggressively buying back shares, a move that can signal confidence from management in the company's intrinsic value and future prospects.

Moreover, Voya's commitment to its shareholders is evident as it has raised its dividend for 5 consecutive years and maintained dividend payments for 12 consecutive years, underscoring a reliable return to investors.

From a valuation standpoint, Voya Financial stands out with a P/E ratio of 9.69, which adjusts to an even more attractive 8.51 for the last twelve months as of Q1 2024. This is complemented by a PEG ratio for the same period at a low 0.17, suggesting that the company's earnings growth may not be fully reflected in its current stock price. Furthermore, with a robust revenue growth of 20.85% in the last twelve months as of Q1 2024, Voya is demonstrating its ability to expand financially.

For those considering a deeper dive into Voya Financial's performance metrics, InvestingPro offers additional tips and insights. There are currently 6 more InvestingPro Tips available that could provide further clarity on the company's financial health and investment potential. To explore these tips and take advantage of real-time data, investors can use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.

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