Voya Financial, Inc. (VOYA - Free Report) has been gaining momentum on the back of strategic acquisitions, favorable retention, positive impacts of the Benefitfocus acquisition, improved investment income, stronger surplus income and sufficient liquidity.
Growth Projections
The Zacks Consensus Estimate for Voya Financial’s 2024 earnings per share indicates a year-over-year increase of 5.8%. The consensus estimate for revenues is pegged at $1.30 billion, implying a year-over-year improvement of 15.9%.
The consensus estimate for 2025 earnings per share and revenues indicates a year-over-year increase of 11.7% and 3.2%, respectively, from the corresponding 2024 estimates.
Earnings Surprise History
Voya Financial has a solid earnings surprise history. It beat estimates in three of the last four quarters and missed in one, the average being 7.94%.
Zacks Rank & Price Performance
VOYA currently carries a Zacks Rank #3 (Hold). Over the past year, the stock has gained 5.6% compared with the industry’s rise of 26.2%.
Image Source: Zacks Investment Research
Business Tailwinds
VOYA’s earnings are driven by its solid segmental performances across Wealth Solutions, Investment Management and Health Solutions. These businesses are higher-growth, capital-light and higher-return units, boasting the company’s solid presence in the market.
The Wealth Solutions segment is steadily witnessing significant growth on the back of continued strength in underlying business results, higher surplus income, lower credited interest, improved investment income, weaker fee-based margin, a favorable change in deferred acquisition costs and value of business acquired and lower administrative expenses. In Wealth Solutions, full-service recurring deposits should continue to gain from growth in the corporate markets.
The Investment Management segment should benefit from higher investment capital returns due to its overall market performance and improved fee revenues, driven by higher average equity markets and positive net flows.
VOYA is constantly taking strategic steps to ramp up growth in its Investment Management segment. Voya Financial and Allianz Global Investors inked a long-term strategic partnership that added scale and diversification to Voya Investment Management. Voya Investment Management’s adjusted operating margin is expected to increase 30-32% for 2024.
The Health Solutions segment of the insurer is likely to benefit from growth across all product lines, favorable retention and the positive impacts of the Benefitfocus acquisition.
The company’s capital levels remain strong. As of Mar 31, 2024, the estimated combined RBC ratio, with adjustments for certain intercompany transactions, was 412%. Voya Financial exited the first quarter with cash and cash equivalents of $995 million, which jumped 37.4% year over year. This financial flexibility provides strength to the company. The free cash flow conversion rate remained above 90%. VOYA expects to generate more than $800 million of free cash flow in 2024.
Operational excellence has been helping the company deploy capital to enhance shareholders’ value. For 2024, the company remains focused on deploying capital to shareholders via share repurchases and dividends, given the actions taken to reduce debt in 2023. VOYA reaffirmed the EPS CAGR target of 12% to 17% for the three years ending in 2024.
The Zacks Consensus Estimate for VOYA’s 2024 earnings has moved north 0.7% in the past 30 days. This should instill investors' confidence in the stock.
Headwinds
The life insurer has been experiencing an increase in expenses due to higher policyholder benefits, interest credited to contract owner account balances, operating costs and interest expenses. If the company doesn't strive to generate revenue growth more than the magnitude of increase in expenses, the margin will continue to erode.
Stocks to Consider
Some better-ranked stocks from the industry are Reinsurance Group of America, Incorporated (RGA - Free Report) , Radian Group Inc. (RDN - Free Report) and EverQuote, Inc. (EVER - Free Report) . While Reinsurance Group sports a Zacks Rank #1 (Strong Buy), Radian Group and EverQuote carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Reinsurance Group has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 19.48%. In the past year, shares of RGA have gained 42.4%.
The Zacks Consensus Estimate for RGA’s 2024 and 2025 earnings implies year-over-year growth of 3% and 5.2%, respectively.
Radian Group has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 22.79%. In the past year, shares of RDN have gained 24%.
The Zacks Consensus Estimate for RDN’s 2024 and 2025 revenues implies year-over-year growth of 8.2% and 4.9%, respectively.
EverQuote has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 65.16%. In the past year, shares of EVER have surged 171.1%.
The Zacks Consensus Estimate for EVER’s 2024 and 2025 earnings implies year-over-year growth of 98% and 550%, respectively.
