Aflac (AFL) Down 1.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Aflac (AFL). Shares have lost about 1.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Aflac due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Aflac’s Q1 Earnings Beat Estimates

Aflac Inc.’s earnings per share of $1.21 beat the Zacks Consensus Estimate by 9.01% and also increased 8% year over year.

Total revenues in the quarter declined 8.8% year over year to $5.2 billion and also missed the Zacks Consensus Estimate by 6.13%.

Further, total acquisition and operating expenses inched up 3.8% year over year to $1.5 billion.

Strong Segmental Results

Aflac Japan
 
Total revenues remained unchanged year over year at $3.8 billion, led by a 0.9% decrease in premium income to $3.2 billion, partly offset by a 5.2% increase in net investment income to $642 million. Premium declined due to lower sale of protection-type first sector and third-sector products. Pre-tax operating earnings inched up 2.5% from the prior-year quarter to $855 million. Results of the segment in the quarter were affected primarily by a reduction in cancer insurance sales through Japan Post.

Aflac United States

Total revenues rose 2.9% year over year to $1.7 billion, led by a 1.5% increase in premium income to $1.5 billion. Net investment income was steady at $177 million. Pre-tax operating earnings from the U.S. segment were $326 million, up 0.9% year over year.

Dividend Update

The board of directors declared the company’s second-quarter dividend of 28 cents per share, payable Jun 1, 2020 to its shareholders of record on May 20.

Share Repurchase Update

The company bought back 10 million shares worth $449 million during the first quarter.

Solid Financial Position (as of Mar 31, 2020)

Total investments and cash were $137 billion, up 4.3% year over year.

Total assets were $151.6 billion, up 4.1% year over year.

Shareholders' equity (excluding AOCI) was $22.2 billion, up 2.8% year over year.

Adjusted book value per share was $30.92, up 7% year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -6.26% due to these changes.

VGM Scores

At this time, Aflac has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Aflac has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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