Manulife Financial Corp. (TSX: MFC)(NYSE: MFC), one of the largest financial services companies in the world, announced its third-quarter earnings results after the market closed on Wednesday, and its stock responded by rallying 4.13% in Thursday’s trading session. Let’s break down the quarterly results and the fundamentals of its stock to determine if we should be long-term buyers today.
The results that sent the stock higher
Here’s a quick breakdown of the 10 of most notable financial statistics from Manulife’s three-month period ended September 30, 2017, compared with the same period in 2016:
| Metric | Q3 2017 | Q3 2016 | Change |
| Net premium income | $7.24 billion | $7.20 billion | 0.6% |
| Net investment income | $2.15 billion | $4.34 billion | (50.5%) |
| Other revenue | $2.54 billion | $2.92 billion | (12.9%) |
| Total revenue | $11.93 billion | $14.46 billion | (17.5%) |
| Core earnings | $1.09 billion | $996 million | 8.9% |
| Diluted core earnings per share (EPS) | $0.53 | $0.49 | 8.2% |
| Core return on equity | 10.6% | 9.8% | 80 basis points |
| Assets under management and administration | $1.01 trillion | $966 billion | 4.1% |
| Wealth and Asset Management net flows | $4.01 billion | $2.69 billion | 48.8% |
| Book value per share | $19.68 | $19.92 | (1.2%) |
What should you do with Manulife’s stock now?
It was a solid quarter overall for Manulife, and its core EPS beat analysts’ expectations, which called for $0.52, so I think the 4.13% rally on Thursday was warranted. I also think the stock still represents a great investment opportunity for the long term for two fundamental reasons.
First, it’s still undervalued. Manulife’s stock has risen more than 14% year to date, but it still trades at just 12.2 times fiscal 2017’s estimated EPS of $2.21 and only 11.3 times fiscal 2018’s estimated EPS of $2.43, both of which are inexpensive compared with its five-year average multiple of 16; these multiples are also inexpensive given its current earnings-growth rate and its estimated 12.6% long-term earnings-growth rate.
Second, it has a high yield and a track record of dividend growth. Manulife currently pays a quarterly dividend of $0.205 per share, equating to $0.82 per share on an annualized basis, which gives it a 3% yield. Foolish investors must also note that the company has raised its annual dividend payment each of the last three years, and that its 10.8% hike in February has it on track for 2017 to mark the fourth consecutive year with an increase.
Manulife’s stock is up more than 24% since I first recommended it in February 2015, which does not even include reinvested dividends, and I think it still represents a great long-term investment opportunity today, so take a closer look and consider adding it to your portfolio.
