Globe Life(US:GL) ZACKSยท2024-09-12 13:20Core Viewpoint - Globe Life Inc. has faced significant challenges in 2023, with a 16.7% decline in share price year-to-date, underperforming both the finance sector and the broader market, despite positive growth projections for earnings and revenues in the coming years [1][6][15] Financial Performance - Globe Life's shares have decreased by 16.7% in 2023, while the finance sector and S&P 500 have seen returns of 12% and 15%, respectively [1] - The company has been struggling with rising expenses, including policyholder benefits, acquisition costs, and interest expenses, leading to an increase in total expenses [2] - Administrative expenses are projected to be around 7% of premiums in 2024, which is an increase from 2023 levels [3] Debt and Capital Structure - Globe Life's long-term debt has risen, with a debt-to-capital ratio worsening; total debt increased by 11% year-over-year as of June 30, 2024 [4] - The company faces higher interest expenses due to its elevated debt levels, which could impact its creditworthiness if not managed properly [4] Stock Performance and Technical Analysis - The stock closed at $101.34, above its 50-day simple moving average of $93.43, indicating a potential uptrend [5] Growth Projections - The Zacks Consensus Estimate predicts a 12% year-over-year increase in earnings per share for 2024, with revenues expected to reach $5.82 billion, reflecting a 5.5% improvement [6] - For 2025, earnings per share and revenues are projected to grow by 10.6% and 4.7%, respectively, compared to 2024 estimates [6] Analyst Sentiment - Recent analyst activity shows one analyst has raised 2024 estimates, while two have increased 2025 estimates, indicating a slight positive sentiment [7] Return on Capital - Globe Life's trailing 12-month return on equity stands at 21.9%, surpassing the industry average of 20.9%, indicating effective utilization of shareholder funds [7] - The return on invested capital (ROIC) is 13.3%, significantly higher than the industry average of 4.6%, reflecting improved efficiency in generating income [8] Revenue Drivers - Revenue growth is being driven by premium increases in the Life Insurance and Health Insurance segments, as well as net investment income [9] - Strong performance from the American Income and Liberty National divisions is expected to contribute positively to future revenue growth [10] - Net investment income has shown improvement and is anticipated to continue growing due to better invested assets and higher interest rates [11] Liquidity and Capital Position - Globe Life maintains a strong liquidity position with robust cash generation capabilities, targeting a consolidated Company Action Level RBC ratio of 300-320% for 2024 [12] Shareholder Value - The company has a strong capital position, allowing for share buybacks and dividend payouts, with dividends increasing at a CAGR of 6.79% over the past eight years [13] Valuation - Globe Life is trading at a discount compared to the industry average, with a forward 12-month price-to-book ratio of 7.91X, lower than the industry average of 13.54X, presenting a compelling investment opportunity [14] Conclusion - Despite facing higher expenses, Globe Life's growth in life and health sales, improved investment assets, strong liquidity, and effective capital deployment suggest potential for recovery and sustained growth, making it a stock worth holding [15]