RGA - Reinsurance Group of America cut at JPMorgan as EPS consensus overstates earnings power

Morgan Stanley analyst Jimmy Bhullar has downgraded shares of Reinsurance Group of America ( NYSE: RGA ) to Neutral from Overweight on Monday, arguing that EPS consensus levels for Q3 and 2023 overstate the company's earnings power.

RGA stock drifted down 1.5% in premarket trading.

Bhullar acknowledged his upbeat long-term outlook for RGA, though "the assumed recovery in margins is already captured in consensus projections and we feel the stock's valuation is not enticing enough to merit a bullish view in the near-to intermediate-term," he wrote in a note.

He pointed out that the company's margin expansion in Q2 drove upward revisions in EPS estimates, "which we feel were unwarranted."

Overall, Bhullar thinks Street estimates "are too optimistic" especially as the company will likely continue incurring modest Covid-19 claims in the near term, he said. Consensus views don't appear to have adjusted for the strong dollar ( DXY ), and the recent jump in Covid deaths in Japan.

The consensus EPS revision trend for 2022 shows a 30% spike from three months ago and +42.2% from six months prior, now standing at $12.74.

Bhullar's Neutral rating agrees with the Quant's Hold rating, but diverges from the average Wall Street analyst rating of Buy.

Seeking Alpha contributor Steven Cress explained how Reinsurance Group of America is one of his top three insurance stocks due for a rebound .

For further details see: