On Wednesday, Evercore ISI analyst Thomas Gallagher upgraded Globe Life Inc. (NYSE:GL), a $9.36 billion market cap insurer trading at an attractive 9.38x P/E ratio, from In Line to Outperform, increasing the price target from $132.00 to $143.00. The analyst's optimism is based on the company's recovery from its 2024 lows, which were impacted by allegations of sales misconduct and potential regulatory sanctions.
Despite these challenges, Globe Life's stock has made a significant recovery, though it still underperformed the sector by over 30% in 2024. According to InvestingPro, the company shows several positive indicators, with 8 additional ProTips available to subscribers.
The upgrade reflects the expectation that Globe Life will maintain growth in 2025 and 2026, with earnings per share (EPS) growth projected to surpass that of most life insurance peers. The company maintains a "GREAT" overall Financial Health Score of 3.05 on InvestingPro, supporting its strong operational outlook.
The potential risks from the Department of Justice inquiry that began in early 2024 are anticipated to diminish, especially with the expected turnover in staffing following recent election results. The analyst also noted that social media checks of the Arias agency, a key concern in the short seller reports, indicate that business operations are continuing as usual as of early January 2025.
Gallagher pointed out that although health insurance margins were soft in the third quarter of 2024, there is an expectation for recovery as Medicare supplement repricing takes effect in 2025. The life insurance segment is expected to continue driving strong results, supported by favorable mortality experience and solid top-line growth.
Additionally, improvements in free cash flow for Globe Life in 2025 and 2026 are projected to contribute to positive returns for shareholders, primarily through share repurchases and potential benefits from reinsurance activities with its Bermuda captive.
Evercore ISI's EPS estimate for Globe Life in 2025 is $13.70, approximately 1% above the consensus. The initial 2026 EPS estimate is set at $15.08, which is 1-2% higher than the consensus. With revenue growth of 6.72% and analyst price targets ranging from $105 to $188, the company shows promising fundamentals. The raised price target to $143 is justified by the initial estimates for 2026 and corresponds with the expected 10% increase in EPS for that year.
The full report from Evercore ISI provides a detailed discussion on growth expectations, underwriting margins, capital management, valuation, and the reduction of regulatory risk for Globe Life. For comprehensive analysis and detailed metrics, investors can access the full Pro Research Report on InvestingPro.
In other recent news, Globe Life Inc. has been the center of several significant developments.
The company unveiled impressive growth in its Q3 2024 financial results, with net income escalating to $303 million and a 29% increase in net operating income to $308 million. Following these results, Truist Securities revised its earnings per share estimates for 2024 and 2025, leading to a price target hike to $105.00.
Globe Life also addressed allegations from a report by Viceroy Research, asserting the claims were unfounded and highlighting its successful shift to a virtual business model for its subsidiary, American Income Life (AIL). This shift has led to an increase in agent numbers and a revenue growth of 6.7% over the last twelve months.
In addition, TD Cowen reaffirmed its confidence in Globe Life, maintaining a Buy rating and a price target of $150.00. This endorsement followed a meeting with the company's management, which expressed an optimistic outlook regarding ongoing regulatory inquiries and the performance of Globe Life's core business.
Globe Life also introduced an executive severance plan covering scenarios involving the termination of the company's Co-CEOs and other Named Executive Officers. Furthermore, the company expanded its stock buyback program to $1.8 billion, emphasizing its commitment to optimizing shareholder value.
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