On Tuesday, RBC (TSX:RY) Capital adjusted its outlook on Voya Financial (NYSE:VOYA), increasing the price target to $95 from the previous $90, while retaining an Outperform rating on the company's stock. The revision follows Voya Financial's third-quarter earnings results, which have led to a fine-tuning of earnings per share (EPS) estimates by the firm.
The analyst from RBC Capital highlighted that although there is potential uncertainty surrounding Voya's stop-loss business, especially as claims experience continues to unfold, they anticipate a significant move towards normalization by 2025. The uncertainty is also tied to gaining a clearer understanding of the potential price elasticity of the business during the January renewals.
RBC Capital has expressed a continued preference for Voya Financial's business model, which is characterized by being capital-light and generating high free cash flow (FCF). The firm also sees a strong opportunity for organic growth within the company. This positive outlook is reflected in the decision to maintain the Outperform rating.
The adjustment in price target to $95 from $90 comes as RBC Capital reassesses the financial prospects of Voya Financial in the wake of recent quarterly performances. The firm's analysis suggests that despite the uncertainties, the strengths of Voya's business model warrant a higher valuation.
In conclusion, RBC Capital's latest assessment underscores their confidence in Voya Financial's future performance, backed by the company's solid business model and growth potential, despite the acknowledged uncertainties in the stop-loss segment of the business.
In other recent news, Voya Financial experienced a robust growth in its third-quarter earnings for 2024. The company's adjusted operating earnings per share (EPS) saw a 9% year-over-year increase, hitting $1.90. Key growth areas included Wealth Solutions and Investment Management, which witnessed nearly 20% and over 10% increases respectively.
Despite facing challenges in the Health Solutions sector, Voya Financial acquired OneAmerica's retirement business, a move projected to boost pretax operating earnings by at least $75 million in its first year.
In addition to these developments, Voya Financial also announced plans to return $800 million in excess capital to shareholders in 2024. Piper Sandler, an independent financial services firm, maintained an Overweight rating on Voya Financial's stock, even as it increased the price target to $91 from the previous $88. The firm's decision came despite recent headwinds in Voya's Health Solutions sector.
Piper Sandler's new price target reflects a 9.4 times multiple of the estimated 2025 earnings, up from the previous 8.8 times multiple. This upward revision is influenced by higher peer group multiples, indicating confidence in Voya Financial's stock performance.
InvestingPro Insights
Recent data from InvestingPro adds depth to RBC Capital's positive outlook on Voya Financial (NYSE:VOYA). The company's market cap stands at $8.01 billion, with a P/E ratio of 12.94, indicating a potentially attractive valuation relative to earnings. This aligns with RBC's view of Voya's strong business model and growth potential.
InvestingPro Tips highlight that Voya has maintained dividend payments for 12 consecutive years and has raised its dividend for 6 consecutive years, showcasing the company's commitment to shareholder returns. This consistent dividend policy supports RBC's assessment of Voya's high free cash flow generation.
Moreover, Voya's revenue growth of 10.94% over the last twelve months and a strong EBITDA growth of 19.06% in the same period reinforce RBC's confidence in the company's organic growth opportunities. The company's profitability is further emphasized by an operating income margin of 15.56%.
It's worth noting that Voya is trading near its 52-week high, with a significant 29.28% price return over the last three months. This market performance aligns with RBC's decision to raise the price target and maintain an Outperform rating.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Voya Financial, providing a deeper understanding of the company's financial health and market position.
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