Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF), one of the world’s leading financial services organizations, announced fourth-quarter earnings after the market closed on February 11 and its stock has responded by falling over 2%. Let’s take a thorough look at the results to determine if we should consider using this weakness as a long-term buying opportunity, or as a warning sign to avoid the stock for the time being.
Breaking down the fourth-quarter results
Here’s a chart of Sun Life’s fourth-quarter earnings compared to its results in the same period a year ago.
|Metric||Q4 2014||Q4 2013|
|Underlying EPS from continuing operations||$0.59||$0.61|
|Adjusted revenue||$6.13 billion||$6.20 billion|
Source: Sun Life Financial
Sun Life’s diluted underlying earnings per share decreased 3.3% and its adjusted revenue decreased 1.1% compared to the fourth quarter of fiscal 2013. The company’s slight decline in earnings per share can be attributed to underlying net income from continuing operations decreasing 4% to $360 million, and its slight decline in revenue can be attributed to net premium revenue decreasing 4.4% to $2.7 billion for the quarter.
Here’s a quick breakdown of 12 other notable statistics and updates from the report compared to the year-ago period:
- Interest and other investment income increased 6.2% to $1.26 billion.
- Fee income increased 12.6% to $1.17 billion.
- General fund assets increased 13% to $139.42 billion.
- Segregated fund assets increased 10.2% to $83.94 billion.
- Mutual funds, managed funds, and other assets under management increased 16.1% to $511.09 billion.
- Total assets under management (AUM) increased 14.8% to $734.44 billion.
- Total adjusted premiums and deposits decreased 3% to $30.89 billion.
- Total capital increased 6.3% to $21.74 billion.
- Operating return on equity (ROE) contracted 510 basis points to 12.6%.
- Book value per share increased 11.2% to $26.87.
- Market capitalization increased 12.2% to $25.7 billion.
- Ended the quarter with $6.82 billion in cash and cash equivalents, an increase of 10.6% from the third quarter.
Sun Life announced that it will be maintaining its quarterly dividend of $0.36 per share, and the next payment will come on March 31 to shareholders of record at the close of business on February 25.
Is now the time to invest in Sun Life Financial?
Sun Life Financial is one of the world’s leading providers of financial products and services, but year-over-year declines in earnings per share and revenue in the fourth quarter has caused its stock to fall over 2%.
Even though I think the post-earnings weakness in Sun Life’s stock is warranted, I also think it represents an intriguing long-term buying opportunity. I think this because the stock trades at very inexpensive valuations, including just 13.8 times fiscal 2014’s earnings per share of $2.96, only 12.3 times fiscal 2015’s estimated earnings per share of $3.32, and a mere 1.5 times its book value per share of $26.87.
In addition, the company pays an annual dividend of $1.44 per share, which gives its stock a bountiful 3.5% yield at current levels and makes it both a value and dividend play today.
With all of the information provided above in mind, I think Sun Life Financial represents one of the best long-term investment opportunities in the financial sector today, so Foolish investors should take a closer look and strongly consider initiating positions.