On Thursday, CFRA adjusted its outlook on Globe Life Inc. (NYSE: NYSE:GL), increasing the stock's price target to $118 from $92. The firm continues to recommend a Hold rating on the shares. The revision follows Globe Life's third-quarter earnings report, which revealed earnings per share (EPS) of $3.49, surpassing both CFRA's prediction of $3.00 and the consensus estimate of $3.06. The company's performance was buoyed by life insurance premiums that were 4% higher than forecasted and health insurance premiums that exceeded expectations by 7%. These figures contributed to a 30% increase in underwriting income.
CFRA's new price target is based on an 8.5 times multiple of the firm's projected operating EPS for 2026, which has been increased by $0.70 to $13.95, and an 8.9 times multiple of the revised 2025 EPS estimate, which has been raised by $1.00 to $13.25. These estimates compare to the one-year average forward multiple of 8.9 times and a peer average of 9.3 times. Additionally, CFRA has lifted its 2024 EPS estimate for Globe Life by $0.49 to $12.29.
The positive adjustments reflect the company's robust quarterly results, driven by stronger-than-anticipated premium growth and improved underwriting outcomes. Despite these strong results, CFRA's stance on the stock remains cautious due to ongoing regulatory investigations into the company. The Department of Justice (DOJ), Securities and Exchange Commission (SEC), and Equal Employment Opportunity Commission (EEOC) are currently investigating allegations of insurance fraud against Globe Life, which the company denies.
While Globe Life's stock has rebounded from a prior sell-off linked to the fraud allegations, CFRA advises against increasing positions in the company at this time. The firm acknowledges the solid quarterly performance but also considers the potential risks associated with the ongoing investigations.
In other recent news, Globe Life Inc. reported a 20% increase in its second quarter 2024 net income, reaching $258 million, surpassing both analysts' and consensus estimates. The company has also expanded its term loan from $170 million to $250 million, extending the maturity date to 2027. Amid these financial highlights, Globe Life is dealing with a potential data breach involving customer and lead information from its subsidiary, American Income Life Insurance Company.
The company is also facing legal challenges from the Equal Employment Opportunity Commission (EEOC), which disputes Globe Life's classification of its agents as independent contractors. Analysts' reactions to these developments have varied, with TD Cowen initiating coverage on Globe Life with a Buy rating and a price target of $150, while CFRA upgraded Globe Life's shares from Sell to Hold and increased the price target to $92.00.
Despite these challenges, Globe Life is actively working on capital management strategies, aiming for an authorization of $1.3 billion by the end of 2025. These are recent developments concerning Globe Life Inc.
InvestingPro Insights
Globe Life's recent financial performance aligns with several key metrics and insights from InvestingPro. The company's P/E ratio of 9.87 and adjusted P/E ratio of 9.38 for the last twelve months as of Q2 2024 reflect its attractive valuation, especially considering its strong earnings growth. This is further supported by an InvestingPro Tip indicating that Globe Life is "Trading at a low P/E ratio relative to near-term earnings growth."
The company's revenue growth of 7.12% over the last twelve months and 8.58% in Q2 2024 corroborates CFRA's observations about stronger-than-anticipated premium growth. Additionally, Globe Life's robust profitability is evident in its operating income margin of 24.89% for the last twelve months.
An InvestingPro Tip highlights that Globe Life "Has maintained dividend payments for 54 consecutive years," demonstrating the company's commitment to shareholder returns despite regulatory challenges. This long-standing dividend history, combined with a current dividend yield of 0.87% and a dividend growth rate of 6.67% over the last twelve months, may appeal to income-focused investors.
For those seeking more comprehensive analysis, InvestingPro offers 8 additional tips for Globe Life, providing a deeper understanding of the company's financial health and market position.
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