FBR on AFLAC

Barron’s carries a report on AFLAC (AFL) from FBR. They upgraded the stock to Outperform. Here’s a sample:

Aflac (ticker: AFL) shares have lagged the group by 14% in the last three months, likely on increased European sovereign and financial credit concerns.

In both our base-case and stress-case credit-loss scenarios, we believe Aflac is adequately capitalized to earn its way through potential impairments related to Portugal, Ireland, Italy, Greece and Spain (PIIGS) exposure.

If credit losses materialize as we forecast in our base case, the company should be well positioned to deliver on the high end of buyback guidance, with the potential to upsize the buyback program.

Even in our stress case, we believe the company could deliver on its buyback guidance of six million to 12 million shares per year. Our 2011 estimates and 2012 earnings-per-share estimates assume 10 million and 12 million of share buybacks, respectively.

We have fine-tuned our 2011 EPS estimate to $6.25 from $6.31, as the yen has weakened recently, and introduce a 2012 EPS of $6.85.

We are raising our price target to $69 from $59, based upon a 10 times multiple of 2012 EPS. Over the last five years, Aflac’s forward price-to-earnings ratio has averaged 11.1 times.

This is a very positive report. Wall Street currently expects AFL to earn $6.17 per share so FBR is well above that. The stock got as high as $58.60 this morning which is another 52-week high.

Posted by on January 24th, 2011 at 9:54 am


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