Fyi... G + M's Rob Carrick commentary on MFC on TD site this morning.
A Manulife moment
1 hour ago by Rob Carrick
The most disappointing blue-chip stock over the past three years has a fan.
In a recent report, investment dealer Odlum Brown issued an optimistically toned “Hold” rating on Manulife, which has lost close to two-third of its value in the past three-year period. Odlum’s rationale starts with a third-quarter loss that was “less worse than expected.”
If that sounds tepid, remember we’re talking about Manulife here (disclosure: I’m a Manulife shareholder). This is the insurance company that halved its dividend back in summer 2009 and has reported multiple quarters in recent years where losses exceeded $1-billion. For the third quarter, the loss came in at $947-million.
That’s better than expected, Odlum says. It noted that if you exclude extraordinary and unusual items, Manulife reported adjusted earnings from operations of $779-million. That’s up from $658-million last quarter and higher than the company had indicated it was expecting. According to Odlum, Manulife is doing a good job developing businesses targeted for growth, particularly in Asia.
Among the unusual and extraordinary expenses in the third quarter was a $2-billion charge related to the annual review of all actuarial assumptions, and a $1-billion goodwill charge on the firm’s U.S. insurance operations. Bottom line, the company lost 55 cents per share, much less than the consensus expectation of a loss of 77 cents per share.
Manulife shares surged almost 23 per cent to the low $15 range in the first 10 days of November, but Odlum sees more upside. The firm’s price target is $18, which implies a total return in the area of 23.5 per cent if you include the dividend.
Still, Manulife only rates a “hold” from Odlum, which offers two explanations. One, its clients are already heavily exposed to the stock. Even with the improving outlook for the stock, Odlum feels the need to keep an eye on the down side. Two, Odlum sees Manulife as offering the highest risk of any of the insurers it covers. “From current levels, Manulife could prove to be a home run stock,” the Odlum report says. “Still, if the economy, stock market and interest rates take a turn for the worst, it could prove to be a loser. It’s not our style to swing for the fences.”
Happy investing and GLTA longs!