Credit Suisse Starts AFLAC (AFL) at Underperform
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Credit Suisse initiates coverage on AFLAC (NYSE: AFL) with a Underperform rating and a price target of $75.00.
Analyst John Nadel commented, "Despite the consistent and defensive nature of Aflac’s businesses, we rate shares Underperform based on recent strong share outperformance vs. the broader group that has been largely currency driven, in our view. Aflac has a history of strong returns and has traditionally been a more defensive stock, with a strong capital position, lower exposure to feebased earnings (and thus equity markets), and relatively less interest rate sensitivity. However, shares are up 20% year-to-date (vs. the S&P 500 up 6%), and by our estimate are factoring in an oversized economic benefit from recent yen strengthening. Further, we are forecasting ROE to compress over the next few years to ~15% (including hedging costs) given sluggish earnings growth due in part to low interest rates and challenging Japanese economic conditions. Further, growing disparity between U.S. and Japanese interest rates will cause an increase in hedging costs which, when included in Operating EPS, will likely cause 2017/18 consensus to reset 7-8% lower."
Shares of AFLAC closed at $72.07 yesterday.
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