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Investing.com -- Shares of Aflac Incorporated (NYSE:AFL) fell 4% following the company’s fourth-quarter earnings release, which revealed an earnings per share (EPS) shortfall against analyst expectations. Despite a significant increase in revenue compared to the same quarter last year, EPS for the insurer came in at $1.56, missing the estimated $1.62.
Aflac reported a strong revenue figure of $5.4 billion for the quarter, surpassing the consensus estimate of $4.23 billion and marking an increase from the $3.8 billion reported in the fourth quarter of 2023. However, the EPS miss was a key driver in the stock’s decline. The company’s net earnings included net investment gains, which were considerably higher than the net investment losses recorded in the previous year.
The insurer also noted an 18.2% increase in adjusted earnings compared to the fourth quarter of 2023, with an adjusted EPS growth of 24.8% to $1.56. This growth was partly attributed to variable investment income exceeding the company’s long-term return expectations. However, a weaker yen/dollar exchange rate negatively impacted adjusted EPS by $0.01.
Aflac Japan experienced a decrease in net earned premiums, primarily due to reinsurance transactions and policies reaching paid-up status. Despite this, adjusted net investment income in Japan saw an increase. On the other hand, Aflac U.S. reported growth in net earned premiums and a rise in persistency, although sales in the U.S. saw a decline in the quarter.
Barclays (LON:BARC) analyst Alex Scott has lowered the price target on Aflac to $95.00 from $98.00, maintaining an Underweight rating. Scott noted that operating EPS missed estimates due to lower-than-expected earnings in Corporate and a higher consolidated tax rate, viewing the quarter unfavorably in light of new guidance.
Wells Fargo (NYSE:WFC) analyst Elyse Greenspan commented on the results, stating, "We expect the stock to trade down on the print given weaker-than-expected sales across the board, as well as higher-than-expected benefit ratios in both the Japan and US." Greenspan also noted that "overall fundamentals were generally lackluster."
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