On Wednesday, BofA Securities adjusted its stance on Voya Financial (NYSE:VOYA), shifting its rating from Buy to Neutral and revising its price target downward to $83.00 from the previous $91.00. The stock has already felt the impact of recent developments, dropping nearly 12% in the past week to $72.21.
According to InvestingPro data, eight analysts have recently revised their earnings expectations downward for the upcoming period. The change comes in response to Voya's announcement regarding the performance of its medical stop-loss business.
The firm now anticipates that the business will report a combined ratio of 90-105% for the fiscal year 2024, suggesting a significant loss ratio for the fourth quarter of 2024, between 100-160%. This projection indicates a potential $0.80-3.00 per share impact on earnings, diverging from the company's target loss ratio of 77-80%.
Voya Financial had previously guided investors on November 4 to expect an 86% loss ratio for the fiscal year 2024, but recent claims experience in October and November has led to a revision of these estimates. The company now foresees that the loss ratio for the year will be more severe than initially anticipated and also expects that the 2025 loss ratio will surpass its target range.
BofA Securities has adjusted its forecast to align with the midpoint of Voya's projected range. The new loss ratio forecast by BofA is set at 87.5%, reflecting the updated expectations from Voya Financial. Despite these challenges, InvestingPro analysis indicates that Voya maintains a strong financial health score of 2.78 (rated as GOOD), with liquid assets exceeding short-term obligations and a solid current ratio of 8.71.
This revision takes into account the latest information provided by the company and aims to provide investors with a more accurate picture of the financial challenges Voya is facing in its medical stop-loss business.
Investors are being alerted to these changes as they may influence the performance of Voya Financial's shares in the market. The revised price target and rating by BofA Securities serve as an indicator of the firm's current valuation and outlook for the company's stock.
According to InvestingPro analysis, the stock appears undervalued at current levels, trading at a P/E ratio of 11.36. Subscribers can access the comprehensive Pro Research Report, which provides detailed analysis of Voya's valuation metrics and growth prospects among 1,400+ top US stocks.
In other recent news, Voya Financial has faced challenges due to its weaker-than-expected fourth-quarter performance, particularly within its Stop Loss policy. Analysts from Evercore ISI and Keefe, Bruyette & Woods have revised their price targets for Voya Financial to $89.00 and $92.00 respectively, while maintaining an Outperform rating. The company's anticipated fourth-quarter loss and the expected departure of Rob Grubka, head of the health and wealth business, have been highlighted as key factors.
In response to these developments, Voya Financial has revised its 2024 accident year expectations, forecasting a mid-point loss ratio of around 98%, significantly higher than the prior estimate of 86%. The company also anticipates a decrease in stop-loss premium revenues for 2025, although an improvement in the loss ratio is expected.
Despite these challenges, Voya Financial has reported strong revenue growth of 10.94% over the past twelve months. RBC (TSX:RY) Capital and Piper Sandler have adjusted their outlook on Voya Financial, increasing their price targets to $95 and $91 respectively.
Additionally, HDFC Bank has appointed an additional independent director to its board, a move that aligns with the corporate governance standards expected of companies listed on international stock exchanges.
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