A stock doesn’t have to be in an exciting business to be worthy of a place on your watch list. Just ask investors in Unum Group (NYSE: UNM), an insurance company that gapped up more than 7% on May 3 after beating first-quarter views.
For investors who don’t need the thrills of the latest Silicon Valley drama to distract them, the Unum Group chart shows a bullish consolidation that’s been forming since late October, below resistance at $46.64. It approached that point twice in March, but sellers swatted down the stock.
That can actually be a good sign, believe it or not. It means investors without conviction are selling shares, which can pave the way for investors with a bullish view to scoop up shares at a lower valuation.
History Of Topping Views
In the first quarter, the company’s earnings of $1.87 per share beat analysts’ consensus estimate of $1.65 per share, as Unum Group earnings data show. That was a 41% increase over the year-earlier quarter.
It marked the fifth quarter in a row of double-digit earnings growth, at rates ranging from 28% to 61%.
The company surpassed consensus earnings estimates in five of the past six quarters
Revenue of $3.036 billion was slightly below consensus views, but as you see, investors were undeterred. It was still a year-over-year increase of 2%, not much less than analysts expected.
It helped that Unum boosted its full-year outlook; as long as there's not a problem in the rear-view mirror that appears likely to continue into the future, markets reward forward-looking statements.
Boosted Full-Year Guidance
Unum now expects 2023 after-tax adjusted operating income per share to grow in a range between 20% and 25%, significantly higher than previous guidance of 8% to 12% growth.
It also expects positive top-line trends, with core operations sales growth of 18.9% and premium growth of nearly 4% on a constant currency basis. Constant currency is a method companies use to eliminate the effects of exchange rate fluctuations over time.
Unum Group’s portfolio includes disability, life, accident, critical illness, cancer, dental and vision coverage.
Unum doesn’t market directly to consumers; instead, it goes through employers and plan administrators, as well as insurance brokers who sell to business customers.
Global Operations
The Chattanooga, Tennessee company has operations in the U.S., the U.K., and Poland. Unum Group has three principal business segments. The largest, in terms of revenue, is Unum U.S., which accounts for about two-thirds of overall sales. It also operates Unum International and Colonial Life, which it merged with in 1993 and still operates as a separate unit.
Unum also operates what it calls the “closed block” segment, consisting of long-term care and other insurance products no longer actively marketed, but for which the company still receives premiums.
The Unum Group dividend yield is 2.99%. The company has a 13-year history of boosting its dividend, landing it a place on MarketBeat’s list of dividend achievers.
Share Repurchase Increases Total Yield
The company also has a share repurchase program. In 2022, Unum Group repurchased $200 million in common shares. It expects to increase the run rate of share repurchases to $300 million, in the second half of this year.
The current buyback yield is 2.43%, an added incentive for investors who are looking for solid return, rather than the sizzle and glamor of big tech.
Because the stock has been in a consolidation since the fourth quarter of 2022, its year-to-date gain is a mediocre 1.44%. In a strange coincidence, that precisely matches the S&P 400 mid-cap index, of which Unum is a component.
Wells Fargo Initiates Coverage
However, Unum Group analyst ratings show a consensus view of “hold” on the stock, with a price target of $46.55, an upside of 6.07%. Don’t forget: That’s an average price target and includes a number of institutions that see Unum stock rising even more.
The most recent analyst action came from Wells Fargo, which on April 25 initiated coverage with a rating of “overweight” and a price target of $57, an upside of 39.81%.
