On Tuesday, Keefe, Bruyette & Woods adjusted its stance on Jackson Financial Inc. (NYSE:JXN), shifting the rating from Outperform to Market Perform, while also increasing the price target to $80 from the previous $75. The move comes after the stock experienced significant growth, with a 45% appreciation attributed to several strategic changes within the company.
The analyst from Keefe, Bruyette & Woods noted that the decision to downgrade was based on the stock's strong performance following the establishment of Brooke Re, adjustments to its variable annuity hedging program, and raised guidance for free cash flow. The first quarter results of 2024 aligned with expectations and showed early signs of success from the revised strategy.
Despite the downgrade, the analyst raised the price target for Jackson Financial, indicating a recognition of the company's progress and potential. The stock is currently trading at a 15% free cash flow yield for the year 2025, which is considered relatively inexpensive. However, the new rating suggests that the current price more accurately reflects the risks associated with Jackson Financial's business model, which is heavily focused on variable annuities.
The analyst's comments further elaborated on the balance of risks, including the company's variable annuity-centric business mix and the gradual increase in capital return in relation to free cash flow over time. These factors have been taken into account in the revised estimates and the new price target for the company.
InvestingPro Insights
As Jackson Financial Inc. (NYSE:JXN) garners attention with its strategic shifts and the resulting stock performance, insights from InvestingPro provide a deeper understanding of the company's financial health and market position. With a notably low P/E ratio of 2.04, which further adjusts to 1.81 for the last twelve months as of Q1 2024, JXN shows a potential value play. The company's aggressive share buybacks, as noted by an InvestingPro Tip, suggest management's confidence in the company's valuation and future prospects.
Moreover, the company has been rewarding its shareholders with a growing dividend, having raised it for three consecutive years. This is underscored by a dividend yield of 3.72% as of the latest data, and a dividend growth of 12.9% in the last twelve months. The strong return of 174.49% over the past year and the price appreciation of 71.7% over the last six months speak to the stock's impressive momentum, aligning with the analyst's observation of Jackson Financial's significant growth.
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