On Thursday, RBC (TSX:RY) Capital adjusted its stance on iA Financial Group (TSX:IAG (LON:ICAG):CN) (OTC: IDLLF), downgrading the stock from Outperform to Sector Perform, while simultaneously raising the price target to Cdn$137.00 from Cdn$105.00. This revision follows iA Financial Group's third-quarter earnings, which outperformed expectations.
The company reported a core earnings per share (EPS) that was $0.40 higher than anticipated and announced a roughly 10% increase in its quarterly dividend. The positive financial results were attributed to successful repricing actions and a quarter-over-quarter reduction in core expenses.
iA Financial Group also anticipates that if the Autorité des marchés financiers (AMF) approves the updated Capital Adequacy Requirement Life Insurance (NS:LIFI) (CARLI) guideline, it could have an additional Cdn$700 million in capital available for deployment. This potential increase in capital could improve the company's return on equity (ROE) aspirations to the 17% range, up from the current target of over 15%.
Despite these positive outcomes and the raised price target, RBC Capital justifies the downgrade by stating that iA Financial Group "deserves a higher valuation multiple" but, even after applying one against conservative estimates, the firm sees "limited upside potential." The analyst's comments reflect a cautious outlook on the stock's future growth prospects despite recent financial achievements.
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