Desjardins Ahead of fourth-quarter earnings season for Canadian lifecos, Desjardins Securities analyst Doug Young thinks “an improved 2021 macro outlook bodes well for the sector.”
He is projecting a 1-per-cent year-over-year increase in core earnings per share on average, however he cautioned that “EPS remains less of a focus right now. Lower sales, interest rates and a weaker U.S. dollar could pressure core results (vs 4Q19).”
Instead, he thinks investors will be watching for 2021 outlooks, particularly for North American markets.
“As we look out to 2021, several drivers are behind our core EPS growth expectations: (1) SLF — margin expansion at its U.S. group insurance operations, momentum in Asia, expense actions in Canada, higher contribution from SLC Management and, potentially, capital deployment (although we have not built any in); (2) MFC — momentum in Asia, in wealth management and expense efficiencies; (3) IAG — integration of acquisitions, organic growth, profit improvement from all businesses and leveraging improved distribution capabilities domestically; and (4) GWO — expense savings in the U.S. and Canada, growth in Europe and the inclusion of MassMutual’s U.S. retirement business,” he said.
After increasingly his quarterly EPS expectations “slightly” to account for higher equity markets and interest rates, Mr. Young raised his target prices for companies in his coverage universe. In order of his pecking order, his changes were :
- Sun Life Financial Inc.( “buy”) to $67 from $66. The average on the Street is $65.75.