A weakening dollar against the yen appears to be adding up to a price surge in shares of Aflac stock.
The Columbus-based supplemental insurance companys shares jumped once again to a 52-week high of $58.46 in early trading Friday on the New York Stock Exchange. The price dipped into negative territory during the day, with the overall market down, but finished up 5 cents at $57.51 per share.
Since bottoming out at a 52-week low of $39.34 per share on June 25 of last year, the firm famed for its humorous duck ad campaign has steadily waddled out of its stock hole. A quick calculation shows Fridays high is a gain of nearly 49 percent since that summer day in 2012.
Sterne Agee stock research analyst John Nadel on Friday morning reiterated his buy rating on Aflac stock, while also pushing his 52-week price target up by $2 to $67 per share.
His primary reasoning was the yen strengthening against the dollar, which makes Aflac earnings in Japan that much more valuable to the company and investors. The company, headquartered on Wynnton Road and employing nearly 4,000 people locally, does about 75 percent of its business in the Asian nation. The balance of its sales come in the U.S.
The stronger recent yen/dollar is likely providing (Aflac) with an opportunity to further add to its currency hedge to protect both 2013 and perhaps more importantly 2014 profit repatriation from the Japan branch, Nadel wrote in Fridays research note.
Specifically, Sterne Agee has increased its 2013 and 2014 earnings-per-share estimates for Aflac from $6.07 and $6.47 to $6.15 and $6.67. Nadel also said the health and life insurers share price is still lagging those of its insurance peers. The companys competitors include MetLife, Prudential Financial and Hartford Financial Services Group.
Against an improved macro backdrop (though clearly volatile), Aflacs shares are up just 8 percent (year to date) vs. the peer group up 31 percent on average, Nadel said. Even if the yen were to weaken back to recent levels, we still believe Aflac shares offer solid relative upside vs. much of the peer group.
Aflac, which will report second-quarter earnings in July, got off to a good start this year with its first-quarter profit performance of $892 million, or $1.90 per share.
The company also paid out a quarterly cash dividend of 35 cents per share on June 3, while continuing to buy back shares of its common stock, which will make those still held by investors more valuable. It repurchased $150 million worth of shares in the quarter, with a goal of buying $400 million to $600 million in stock by years end.
Given the strength of our capital ratios and parent company liquidity, we are even more comfortable with that range, Aflac Chairman and Chief Executive Officer Dan Amos said of the stock repurchase goal.
The yen rose for the fourth straight day Friday amid the Japanese governments attempts to stimulate its long-sagging economy.