Why Is Aflac Stock Up?

Aflac (NYSE:AFL) stock has had a huge run this year, up 31% already. Why is Aflac stock up so much? Resilient earnings of $1.7billion last quarter combined with a stable and growing dividend have supported AFL share price.

Now the question is whether this leading provider of supplemental insurance in the U.S. and Japan will continue to soar or experience a pullback?

Aflac Is Much More Than A Cute Duck Commercial

Aflac may be best known for its commercials featuring a duck but cute marketing is just one aspect of an extraordinary business.

The company provides numerous insurance products throughout the US and Japan. In Japan, the Aflac Japan segment offers a range of insurance, such as cancer, medical, and nursing care insurance, as well as different savings-type insurances, like WAYS and child endowment plans.

The Aflac U.S. segment provides a wide-ranging collection of insurance choices like cancer, accident, disability, critical illness policies, and life insurance to guarantee extensive coverage for its clients from America.

The insurer has gained popularity for paying money swiftly to policyholders or insured people when they have valid claims. Given that insurers often have unfavorable ratings for disputing claims, Aflac is often viewed as a less stressful alternative because of its speedy payouts.

Investors are paying attention to Aflac’s strong performance in the market. In the last year, shares of Aflac have surged by more than 31%. In the past six months, this stock has risen nearly 29%, though the trend has slowed down over the past month.

Is the momentum slowdown going to persist or can new initiatives ignite AFL stock price?

How Is Aflac Expanding Its Portfolio?

Recently, Aflac made a major move to improve customer service experiences in its dental and vision division by joining forces with SKYGEN, an American technology company specializing in these areas. With almost 50 million members nationwide, SKYGEN is well-vetted when it comes to claims.

Using SKYGEN’s technology, Aflac has set its sights on smoothing operations, broadening market coverage, and gaining a competitive advantage in the supplementary health insurance field.

Aflac took another innovative action this year by forming a partnership with Nayya , a company well-known for its digital health benefits guidance.

By using Nayya’s advanced platform, Aflac may well see big improvements in how benefits management is available and works. This will make the experience better for employees and build stronger connections with clients.

Also, Aflac Global Investments made a major move by buying a stake in Tree Line Capital Partners, a respected direct lending firm based in San Francisco. This decision matches AGI with Tree Line’s healthy credit underwriting approach.

Aflac Posting Extraordinary Financials

Aflac has a whole lot going for it right now. For one, it has raised dividend for a full 40 years to a payout of $2 annualized, corresponding to a 1.85% yield.

Perhaps even more impressively, the payout ratio is just 18.7% meaning management has ample room to boost the dividend at its discretion. By the way, Aflac’s dividend payout streak extends to a full 52 years.

Turning attention to the top line, it has been looking very good recently too with year over year sales up 13.2%. In the fiscal second quarter of 2024, which concluded on June 30, 2024, Aflac’s total revenues decreased marginally to $5.138 billion compared to last year.

However, earnings before income taxes were up by 10.6% from the same period in the previous year, amounting to $2.02 billion.

Adjusted earnings and adjusted EPS rose by 8.5% and 15.8%, reaching $1.04 billion and $1.83, respectively. 

If there were a fly in the ointment it would be earnings that is forecast to drop this year. Still, trading at 11.2x earnings, there is room for profitability to lag a little and still place Aflac at an attractive valuation.

What Is Aflac’s Investment Outlook?

In the year ending in December 2024, analysts forecast that Aflac’s revenue will slow to $17.31 billion, roughly 7.4% less than last year. Compared to the previous year’s data, the EPS is predicted to climb by about 3.5% and reach roughly $6.45.

It is interesting to highlight that in three out of the past four quarters, Aflac has performed better than forecasted on both the key revenue and EPS line items.

The following fiscal year, which will finish in December 2025, may well see a slight increase in Aflac’s revenue to $17.46 billion. Compared with the prior fiscal year, EPS is predicted to grow by 5.9%, reaching $6.83.

Apart from this, Aflac’s stock value seems too high. The forward non-GAAP P/E ratio is 14.67x, which shows a premium of 23.7% compared to the industry average of 11.86x. Its forward EV/Sales ratio also appears elevated, standing at 3.49x, which signifies an around 9.5% increase from its industry-standard value of 3.19x.

Additionally, the forward EV/EBIT ratio and Price/Sales ratio stand at 12.58x and 3.10x, 12.4% and 8.5% greater than when compared to usual sector standards of 11.20x and 2.86x, respectively.

Lastly, top line growth is expect to come in negative to the tune of 1.2% annually over the next 5 years while net income is set to fall by 4.8% annually.

Looking at these measures, investors may wish to consider waiting for a better time to invest in Aflac’s stock. The same prudence is shown by most analysts, with 8 out of 10 indicating a time of waiting and watching the stock.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.