Voya Financial ( NYSE: VOYA ) stock climbed as much as 4.1% in Friday morning trading after JPMorgan upgraded shares of the company to Overweight from Neutral, citing an expected improvement in financial results, limited tail risk and attractive valuation.
JPMorgan pointed out that VOYA, down 8.1% Y/Y, was among the life insurance sector's worst performers in the back half of 2022, mostly due to: "(i) management transition and a tempering of investor expectations of a potential takeout, (ii) lackluster results, and (iii) the Benefitfocus ( BNFT ) acquisition and the ensuing suspension of share buybacks," according to a note written to clients.
Those developments, though, are already "more than reflected in sentiment and the stock's valuation currently and the risk-rewards seems attractive," the firm contended.
Thanks to accretion from the recently acquired AGI business, as well as easing COVID-19 claims, and the resumption of stock repurchases, JPM is expecting Voya's ( VOYA ) financial results to improve in 2023 and 2024.
At the same time, JPM downgraded Lincoln National ( NYSE: LNC ) to Neutral from Overweight due to "poor business trends and the company's outsized exposure to macro deterioration." LNC dipped 0.5% in late morning trading and dropped over 56% in the past year.
However, with a favorable macro environment featuring a strong equity market and stable rates, LNC's results would likely improve and management could even resume share buybacks in 2024, presenting potential positive catalysts. But that's a big if in terms of whether macro conditions deteriorate or improve going forward.
Last month, Jefferies also cut LNC to Underperform on the basis of increased uncertainty over its near-term free cash flow generation .
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Voya stock drives up after JPMorgan upgrades on limited tail risk, attractive value