On Monday, Brighthouse Financial , Inc. (NASDAQ:BHF) experienced a shift in its stock rating. Keefe, Bruyette & Woods raised the company's rating from Underperform to Market Perform, albeit with a slightly reduced price target of $47.00, down from the previous $48.00. This adjustment comes after Brighthouse's stock demonstrated notable weakness year-to-date, with a decline of 23%, in contrast to gains seen by its peers in the life insurance and annuities sector.
The performance of Brighthouse's stock has lagged behind that of its competitors, with Jackson (NYSE:JXN) up 38%, Corebridge Financial (NYSE:CRBG) gaining 33%, Equitable Holdings (NYSE:NYSE:EQH) rising 21%, and Lincoln National Corporation (NYSE:NYSE:LNC) increasing by 16%. The underperformance is attributed to concerns over capital generation and the unpredictability of ongoing free cash flow trends.
Despite the absence of immediate catalysts that could drive growth, the firm acknowledges Brighthouse's incremental headway in improving its business mix. Additionally, Brighthouse has fortified its legacy variable annuity hedging strategies over the past few years. These efforts, alongside a valuation that reflects a free cash flow yield of 13% for the year 2025E, have contributed to the analyst's decision to upgrade the stock to Market Perform.
The adjustment in Brighthouse's stock rating and price target reflects a reassessment of the company's position within the market, taking into account both the challenges it faces and the steps it has taken to strengthen its financial standing.
In other recent news, Brighthouse Financial, Inc. has seen a mix of successes and challenges. The company's stock price target was reduced from $55.00 to $50.00 by Piper Sandler due to concerns about earnings. The firm maintained a Neutral rating on the stock, citing a lack of a definitive timeline for distributable earnings scenarios and a projected decline in fixed annuity sales. Increased competition in the registered indexed linked annuity (RILA) market is also expected to pose challenges for Brighthouse Financial.
In contrast, Brighthouse Financial reported steady growth in the first quarter of 2024, despite an adjusted earnings loss. The company showcased a solid risk-based capital ratio, significant growth in its SHIELD annuity product suite, and a 26% increase in life insurance sales. Additionally, Brighthouse Financial repurchased $62 million of common stock in the first quarter of 2024, demonstrating its commitment to delivering shareholder value.
InvestingPro Insights
Brighthouse Financial's recent stock performance and analyst rating changes have investors closely monitoring the company. According to InvestingPro data, Brighthouse Financial has a market capitalization of 2.55 billion USD, with a price-to-book ratio over the last twelve months as of Q1 2024 sitting at a modest 0.61. The company's revenue growth for Q1 2024 showed a quarterly increase of 23.66%, signaling potential recovery amidst previous declines. Despite recent revenue growth, the company has experienced significant gross profit margin pressure, with a margin of -18.32% over the same period.
InvestingPro Tips suggest that Brighthouse Financial is in a unique position. Management's aggressive share buyback strategy indicates confidence in the company's value, while net income is expected to grow this year. Additionally, the Relative Strength Index (RSI) suggests the stock is currently in oversold territory, which could attract bargain-seeking investors. It is also worth noting that Brighthouse Financial is trading near its 52-week low and analysts are optimistic about the company's return to profitability this year.
While Brighthouse Financial does not pay dividends, which may be a consideration for income-focused investors, the company's liquid assets surpassing short-term obligations can be seen as a positive sign of financial stability. For those interested in deeper analysis, InvestingPro offers additional tips for Brighthouse Financial. With the use of the exclusive coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to an extensive range of financial insights and investment tools.
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