On Friday, Berenberg raised its rating on Scor SE (SCR:FP) (OTC: SCRYY) stock from Hold to Buy, simultaneously increasing the price target to €24.00 from the previous €20.00.
The firm cited a milder than expected hurricane season in Q3 2024, which is anticipated to bolster the company's Property & Casualty (P&C) reserves.
According to the firm, the lighter hurricane season should have an immediate positive effect on Scor's ability to enhance its P&C buffers. This development is a key factor in the decision to upgrade the stock's rating.
Berenberg also highlighted that around €500 million of the €1.4 billion life review charge Scor took in the first half of 2024 was due to a change in assumptions in the United States. This adjustment is something that Scor's peers may have already accounted for during their transition to the IFRS17 accounting standards in January 2023.
The firm believes that the strengthening of Scor's buffer in the third quarter will lead to a robust balance sheet. This improvement is expected to pave the way for Scor to resume dividend growth in 2025.
The new price target of €24 suggests an upside potential of over 20%, indicating a positive outlook for the stock's future performance. Berenberg's upgrade reflects confidence in Scor's financial resilience and prospects for shareholder returns.
In other recent news, Scor SE faced a downgrade from both Citi and HSBC due to concerns over earnings and potential solvency challenges. Citi moved its rating from Buy to Neutral and revised its price target to EUR21.40, down from the previous EUR33.70.
The financial services company expressed concerns over potential unexpected losses in property and casualty reinsurance, adverse trends in longevity, particularly within the U.S. mortality segment, and possible changes to the solvency model.
HSBC also downgraded Scor SE from a Buy to a Hold status, reducing the price target to €33. This decision followed Scor SE's report of unfavorable results, driven by a surge in US mortality claims in the first quarter. The company's Life & Health Reinsurance segment was particularly affected.
These concerns are recent developments that could impact Scor SE's financial stability and share performance in the near future. Both Citi and HSBC have expressed reservations about the stock's future performance despite what might appear as an attractive valuation and dividend yield forecast. As Scor SE continues to identify and address these underlying issues, they are expected to exert ongoing pressure on the company's earnings.
InvestingPro Insights
Berenberg's optimistic outlook on Scor SE aligns with several key metrics and insights from InvestingPro. The company's financial data reveals a compelling investment case that supports the upgraded rating.
Scor's dividend yield stands at an attractive 6.4%, with a notable dividend growth of 35.55% over the last twelve months. This aligns with Berenberg's expectation of resumed dividend growth in 2025. An InvestingPro Tip highlights that Scor "pays a significant dividend to shareholders," further reinforcing its appeal to income-focused investors.
The company's valuation metrics also present an interesting picture. With a P/E ratio of 18.2 and a price-to-book ratio of 0.79, Scor appears to be trading at reasonable levels. An InvestingPro Tip notes that the company is "trading at a low P/E ratio relative to near-term earnings growth," suggesting potential undervaluation.
Despite recent challenges, including a significant stock price decline over the past six months (-30.44%), Scor remains profitable. The company's revenue growth of 4.1% and EBITDA growth of 232.16% in the last twelve months indicate resilience in its core business operations.
For investors seeking more comprehensive analysis, InvestingPro offers 8 additional tips for Scor SE, providing a deeper understanding of the company's financial health and market position.
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