AIZ - Assurant stock rises nearly 7% after KBW upgrades to outperform

2023-03-21 14:48:44 ET

Shares of Assurant ( NYSE: AIZ ) rose as much as ~7% to a day-high of $118.74 on Tuesday after the company was upgraded to an investment rating of "outperform" from "market perform" by analysts at Keefe, Bruyette & Woods (KBW).

The insurance company was upgraded after the broker said the stock has a 37% upside to its $152 target following its recent weakness. KBW said AIZ now trades at 8.2x of its updated 2024 estimates, which is near its historical trough multiple.

??KBW updated estimates for FY2024 EPS to $13.51 from its previous expectations of $12.79 for AIZ.

??"We are raising our 2024E estimates by 5% mainly to factor in lower loss ratios in Housing (better accounting for impending rate increases and inflation guard earning in). We think the stock will outperform starting in the next few months as conviction grows that Housing margins will improve and Lifestyle earnings prove resilient; and the current multiple presents an attractive entry point," KBW analysts said in their report.

??KBW said its $152 price target translates to about 11.3x of its 2024E, which it says is in line with the stock's long-term average (11.4x), while also reflecting the company's new business mix, offset by a higher interest/discount rate environment.

??KBW said while it acknowledges 1H23 to likely have its challenges, at least from a year-over-year comp perspective, it expects headwinds to abate in 2024E.

With regards to consumer demand in the AIZ's lifestyle segment, which represents ~75% of its business, the broker thinks a cautious outlook for mobile/auto sales in an economic downturn is sufficiently incorporated in its model, as it expects "just mid-single-digit" annual earnings growth through 2024E.

??KBW's investment thesis: "We believe that Assurant's diverse businesses, growing end-markets, and deep entrenchment with global corporate partners provide for solid growth opportunity long term. As we progress through the year, we expect the market focus to shift away from near-term headwinds, and we think the multiple should rerate back toward its historical mean."

??AIZ fell 18% in 2022, while the benchmark S&P 500 index slipped 20% for the year.

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