Manulife Financial Corp. and Sun Life Financial Inc. Are Big Earnings Movers

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) and Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) are on the move after reporting earnings. What should you do with their stocks now?

| More on:
The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) and Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) are two of the three largest insurance companies in Canada, and both of their stocks have moved lower following the release of their fourth-quarter earnings results.

Let’s break down the reports to determine if the companies’ stocks have responded correctly, then take a quick look at their fundamentals to determine if they represent long-term investment opportunities today.

Manulife Financial Corp.

Manulife Financial Corp. is the largest insurance company in Canada. It reported weaker-than-expected fourth-quarter earnings results before the market opened on February 11, and its stock has responded by falling over 10%. Here’s a summary of six of the most notable statistics from the report compared with the year-ago period:

  1. Core earnings increased 20.5% to $859 million
  2. Core earnings per diluted share increased 16.7% to $0.42, which fell short of analysts’ expectations of $0.45
  3. Revenue before specific items increased 25.6% to $12.31 billion, which fell short of analysts’ expectations of $12.99 billion
  4. Total premiums and deposits increased 60.2% to $40.84 billion
  5. Assets under management and administration increased 35.3% to $935.2 billion
  6. Book value per common share increased 18.8% to $19.51

Overall, it was a solid quarter for Manulife, but the results did fall well short of analysts’ expectations, so I think the weakness in its stock is warranted. However, I think the sell-off is overdone at this point and that the stock represents a great long-term buy for two reasons.

First, it’s undervalued. Manulife’s stock now trades at just 9.2 times fiscal 2015’s core earnings per share of $1.68 and only 7.6 times fiscal 2016’s estimated earnings per share of $2.04, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 95.4 and the industry average multiple of 16.2. It also trades at a mere 0.8 times its book value per share of $19.51, which is very inexpensive compared with its five-year average market-to-book value of 1.21.

Second, it has a great dividend. Manulife pays a quarterly dividend of $0.17 per share, or $0.68 per share annually, which gives its stock a high and safe yield of about 4.4%. It is also important to note that the company has raised its annual dividend payment for two consecutive years, and it is currently on pace for 2016 to mark the third consecutive year with an increase.

Sun Life Financial Inc.

Sun Life Financial Inc. is the third-largest insurance company in Canada. It reported better-than-expected fourth-quarter earnings results after the market closed on February 10, but its stock has responded by falling about 3%. Here’s a summary of six of the most notable statistics from the report compared with the year-ago period:

  1. Underlying net income increased 79.4% to $646 million
  2. Underlying earnings per share increased 78% to $1.05, surpassing analysts’ expectations of $0.87
  3. Adjusted revenue increased 11% to $7.03 billion, surpassing analysts’ expectations of $6.95 billion
  4. Total adjusted premiums and deposits decreased 6% to $30.94 billion
  5. Total assets under management increased 21.4% to $891.33 billion
  6. Book value per common share increased 15.4% to $31.02

Overall, it was a great quarter for Sun Life, and the results surpassed analysts’ expectations, so I do not think the weakness in its stock is warranted. With this being said, I think the weakness represents a great long-term buying opportunity for two reasons.

First, its stock now trades at just 9.8 times fiscal 2015’s underlying earnings per share of $3.76 and only 9.7 times fiscal 2016’s estimated earnings per share of $3.79, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 17.2 and the industry average multiple of 16.2. It also trades at a mere 1.19 times its book value per share of $31.02, which is very inexpensive compared with its five-year average market-to-book value of 1.27.

Second, it pays a quarterly dividend of $0.39 per share, or $1.56 per share annually, which gives its stock a high and safe yield of about 4.25%. It is also important to note that the company increased its dividend by 4.9% in 2015, and it is currently on pace for 2016 to mark the second consecutive year with an increase.

Does one of these insurance giants belong in your portfolio?

Manulife Financial and Sun Life Financial are both moving lower after releasing their fourth-quarter earnings results, but I think both declines represents great long-term buying opportunities. Foolish investors should take a closer look and strongly consider beginning to scale in to positions in one of them today.

Should you invest $1,000 in Crescent Point Energy right now?

Before you buy stock in Crescent Point Energy, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Crescent Point Energy wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

ways to boost income
Dividend Stocks

How I’d Invest $5,000 in Canadian Energy Stocks to Reach Toward Millionaire Status

These energy stocks can provide investors in Canada with some of the top growth opportunities and dividends to boot!

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

How I’d Invest $8,200 in Canadian Monthly Dividend Stocks to Pay for My Retirement Lifestyle

If you have some cash on hand, then these monthly dividend stocks can provide you with cash for life.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Here’s Exactly How $20,000 in a TFSA Could Grow to $300,000

Can you grow $20,000 into $300,000 by holding the iShares S&P/TSX Index Fund (TSX:XIC) in a TFSA?

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Use $15,000 in a High-Yield Dividend ETF for Steady Passive Income

This ETF has it all, a strong portfolio of dividend payers, along with a high yield for investors.

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

A 9.9 Percent Dividend Stock Paying Cash Every Month

If you are looking to park your money for the short term and earn from it, this 9.9% dividend stock…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Have Room in Your TFSA? 1 Canadian Dividend Champion for April Investors

If you've got extra cash in your TFSA, the latest dip in markets may provide you with a golden opportunity…

Read more »

engineer at wind farm
Dividend Stocks

Beginner Investors: How I’d Allocate $5,000 in 2 Safe Dividend Stocks

There are plenty of great dividend stocks on the market, but these two are buy-and-forget candidates that will boost your…

Read more »

grow money, wealth build
Dividend Stocks

Invest $25,000 in These 3 Dividend Stocks for $1,600 in Annual Income

These three Canadian dividend stocks could deliver a reliable passive income of over $1,600 annually.

Read more »