Credit Suisse Starts Torchmark (TMK) at Neutral
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Credit Suisse initiates coverage on Torchmark (NYSE: TMK) with a Neutral rating and a price target of $68.00.
Analyst John Nadel commented, "While we like TMK's predictable earnings stream, consistent free cash flow deployment and solid ROE, we initiate at Neutral because we believe these characteristics are already well discounted in current valuation, with shares trading at 13.8x our 2017E EPS and 2.08x 2Q16 BVPS excl. AOCI. We believe current valuation is reflective of more than just TMK’s relative safety vs. the peer group (less sensitivity to low long-term interest rates and lower asset leverage), and embeds some level of takeout premium following increased M&A activity by Japanese buyers of smaller, U.S. life insurers over the past two years. Moreover, we estimate TMK is trading at just under 25x 2017E free cash flow compared with the peer group at 13.6x on average. While fundamental operating performance has been generally solid (save for modest margin compression in TMK’s Direct Response channel), current valuation more than reflects this, in our view."
Shares of Torchmark closed at $64.38 yesterday.
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