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.