On Thursday, BofA Securities revised its stance on Chubb Corporation (NYSE:CB), changing the rating from Underperform to Neutral and increasing the price target to $266 from the previous $244.
The adjustment comes as the firm anticipates a higher investment yield for Chubb's investments and insurance float, projecting an exit yield of 4.7% at the end of 2026, up from 4.2% in the first quarter of 2024.
The analyst at BofA Securities has adjusted the earnings per share (EPS) forecast for the years 2024 through 2026, factoring in a slightly more optimistic investment yield. Additionally, the firm's tax rate assumption has been reduced to 18.5%, down from 19%. These changes collectively contribute to a 4-5% increase in the projected EPS for the upcoming years, although the revision for the 2024 EPS is described as more modest.
The updated forecast by BofA Securities also takes into account the recent weather events, with an increased expectation for catastrophe losses in the second quarter of 2024 following storm activity in Texas. Despite this, the EPS is expected to benefit from the recent strength of the US Dollar.
Chubb Corporation, a global insurance leader, is poised to see an improved financial performance based on these revised assumptions. The new Neutral rating suggests that BofA Securities views the company's stock as less likely to underperform the market, while the raised price target indicates a potential for the stock's value to increase in the near future.
InvestingPro Insights
As BofA Securities updates their outlook on Chubb Corporation, real-time data from InvestingPro provides a deeper financial perspective on the company. With a robust market capitalization of $112.22 billion and a forward-looking P/E ratio of 12.18, Chubb stands as a significant player in the insurance industry. The company's revenue growth is notable, with a 17.25% increase over the last twelve months as of Q1 2024, and a quarterly surge of 19.23% in Q1 2024. These figures underscore Chubb's capacity to expand its top-line amidst challenging market conditions.
InvestingPro Tips highlight the company's strong profitability metrics, such as an operating income margin of 19.75% and an EBITDA growth of 51.17% over the last twelve months as of Q1 2024. These indicators suggest that Chubb is not only growing its revenue but also managing its expenses efficiently to boost its earnings. Additionally, the company's share price is nearing its 52-week high, trading at 97.11% of this peak, which aligns with BofA Securities' increased price target.
For investors seeking more comprehensive analysis, InvestingPro offers PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With more than 15 additional InvestingPro Tips available, users can gain a more detailed understanding of Chubb Corporation's financial health and future prospects.
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