{"id":313572,"date":"2010-02-12T11:50:00","date_gmt":"2010-02-12T16:50:00","guid":{"rendered":"e2249889-c78b-43e3-9643-b1d7d4aa587b:395241"},"modified":"2010-02-12T11:50:00","modified_gmt":"2010-02-12T16:50:00","slug":"manulife-downgraded-mindful-of-locking-out-equity-upside","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/313572","title":{"rendered":"Manulife downgraded, mindful of locking out equity upside"},"content":{"rendered":"<p>RBC Capital Markets downgraded Manulife Financial Corp. from Outperform to Sector Perform and trimmed its price target on <a href=\"http:\/\/www.financialpost.com\/markets\/company\/index.html?symbol=MFC&amp;id=98413\" >the stock<\/a> by $2 to $22 on Friday.<\/p>\n<p>Manulife\u2019s <a href=\"http:\/\/www.financialpost.com\/todays-paper\/story.html?id=2552892\" >fourth quarter earnings<\/a> per share of 51\u00a2 came in below RBC\u2019s estimate of $1.02 and the Street\u2019s at 69\u00a2.<br \/>Analyst Andre-Philippe Hardy also cut his 2010 forecast from $1.85 to $1.40.<\/p>\n<p>\u201cManulife\u2019s earnings remain most sensitive to movements in interest rates and equity markets,\u201d he told clients.<\/p>\n<p>Mr. Hardy believes that the company\u2019s valuation of 2011 estimated EPS is not low enough relative to bank stocks given Manulife\u2019s higher potential earnings volatility and lower expected return on equity. <\/p>\n<p>He also suggested that consensus earnings estimates need to decline unless interest rates and equity markets both rise materially. If higher long-term rates materialize and if stocks strenghten further, the analyst does believe Manulife shares have the most near-term upside.<\/p>\n<p>\u201cHowever, outside of a near-term rally that would be driven by those macro factors becoming in favour of Manulife, we foresee more upside in bank stocks and in Sun Life\u2019s shares,\u201d he said.<\/p>\n<p>Mr. Hardy also noted that equity market returns so far in the first quarter suggest a weak outlook for profits in the first three months of 2010. Meanwhile, disclosures around goodwill and potential U.S. tax assessments suggest more potential noise around reported earnings.<\/p>\n<p>Credit Suisse analyst Jim Bantis noted that the earnings shortfall come from lower-than-expected reserve gains from positive equity market performance and higher interest rates.<\/p>\n<p>At year-end, Manulife\u2019s equity exposures were 35% hedged or reinsured, up from 20% at the end of 2008. Subsequent to year-end, the company hedged another $7.6-billion of guarantee value, increasing the hedged or reinsured percentage up to 42%, the analyst noted.<\/p>\n<p>\u201cSubstantially all new variable annuity business is hedged,\u201d he said. \u201cWe don\u2019t anticipate this coverage to materially exceed 50% as Manulife is mindful of locking out the upside if equity markets continue to normalize.\u201d <\/p>\n<p>Mr. Bantis rates Manulife shares at Neutral with a target price of $19. <\/p>\n<p><a href=\"mailto:jratner@nationalpost.com\">Jonathan Ratner<\/a> <\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/network.nationalpost.com\/NP\/aggbug.aspx?PostID=395241\" width=\"1\" height=\"1\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>RBC Capital Markets downgraded Manulife Financial Corp. from Outperform to Sector Perform and trimmed its price target on the stock by $2 to $22 on Friday. Manulife\u2019s fourth quarter earnings per share of 51\u00a2 came in below RBC\u2019s estimate of $1.02 and the Street\u2019s at 69\u00a2.Analyst Andre-Philippe Hardy also cut his 2010 forecast from $1.85 [&hellip;]<\/p>\n","protected":false},"author":4059,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-313572","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/313572","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4059"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=313572"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/313572\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=313572"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=313572"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=313572"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}