Should You Add Brighthouse Financial Stock for Better Returns?
Brighthouse Financial, Inc. BHF has been benefiting from higher annuity and life insurance sales, a conservative investment strategy, asset growth, improved interest rates and sufficient liquidity.
BHF’s Zacks Rank & Price Performance
Brighthouse Financial currently carries a Zacks Rank #2 (Buy). Its shares have lost 16.7% in the year-to-date period against the industry’s 20.3% growth. It has also underperformed the Zacks S&P 500 composite’s 19.6% rally in the said time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BHF YTD Performance
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BHF’s Growth Projection
The Zacks Consensus Estimate for Brighthouse Financial’s 2024 earnings per share indicates a year-over-year increase of 29.8%. The consensus estimate for revenues is pegged at $8.70 billion, indicating a year-over-year improvement of 3.8%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 9.4% and 3.2%, respectively, from the corresponding 2024 estimates.
Positive Analyst Sentiment Instills Confidence in BHF
Three of the four analysts covering the stock have raised estimates for 2024 while three analysts have raised estimates for 2025 over the past 60 days. The consensus estimate for 2024 and 2025 earnings indicates an improvement of 14.3% and 0.8%, respectively.
Brighthouse Financial’s Return on Capital
BHF’s trailing 12-month return on equity is 26.2%, ahead of the industry average of 15.5%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Earnings Surprise History of BHF
Brighthouse Financial has a decent earnings surprise history. It beat estimates in three of the last four quarters and missed in one, the average being 3.76%.
Key Drivers of Brighthouse Financial
BHF is one of the largest providers of life insurance products in the United States. Given the expansive and compelling suite of life products, the company should benefit from the growing individual insurance market. The insurer remains focused on ramping up sales of life insurance products and expanding its distribution network, aiming to become a premier player in the industry.
BHF remained focused on enhancing its product portfolio with the launch of Shield Level Pay Plus, which is an addition to the suite of Shield Annuities.
Strong Shield Level Annuity sales and higher fixed indexed annuity sales from the company's recently launched SecureKey product boosted the Annuity sales. Fixed deferred annuities also contributed to the growth. Improved underwriting margin and net investment income should contribute to higher Life insurance sales.
Brighthouse Financial should benefit from the growing individual insurance market. BHF remains focused on ramping up new sales of life insurance products, strengthening annuity products and expanding its distribution network, aiming to become a premier player in the industry. Strong Shield Level Annuity sales and higher fixed indexed annuity sales from the recently launched SecureKey product contributed to higher Annuity sales. Higher underwriting margins and net investment income boosted Life insurance sales. Execution of the life insurance strategy, including the addition of new distribution partners and wholesalers, is expected to drive growth.
Net investment income has been exhibiting an improving trend over the past few quarters. Riding on alternative investment income, asset growth and higher interest rates, the insurer expects the metric to improve in the future. Given a well-diversified and high-quality portfolio as well as a conservative investment strategy, we expect the metric to improve in the future. BHF estimates a 9-11% annual yield over the long term on the alternative investment portfolio.
Brighthouse Financial continued to focus on maintaining the strength of the balance sheet. As of June 30, 2024, the estimated combined risk-based capital ratio was 380-400%. Given enhanced financial strength and flexibility, the company remains committed to returning capital to shareholders and intends to maintain an opportunistic share repurchase program to create significant value for them.
BHF Shares are Affordable
Brighthouse Financial is trading at a discount compared with the industry average. It presents a compelling investment opportunity with its attractive forward 12-month price-to-book ratio of 0.65X, lower than the industry average of 1.94X. Also, it has a Value Score of B.
Shares of other life insurers like Voya Financial, Inc. VOYA, Reinsurance Group of America, Incorporated RGA and Manulife Financial Corp MFC are also trading at a discount to the industry average.
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Manulife Financial Corp (MFC) : Free Stock Analysis Report
Reinsurance Group of America, Incorporated (RGA) : Free Stock Analysis Report
Voya Financial, Inc. (VOYA) : Free Stock Analysis Report
Brighthouse Financial, Inc. (BHF) : Free Stock Analysis Report