We are downgrading StanCorp Financial (SFG) to Underperform as we expect delinquencies on commercial mortgage loans to remain modestly high in the foreseeable future. Moreover, we suspect organic growth will remain restricted in the near term, given the sluggish economic environment and challenging labor market conditions.
Also, the earnings results lagged the Zacks Consensus Estimate as well as the year-ago results. Higher premiums in the Insurance Services segment, improved earnings in the Asset Management segment and a positive favorable impact of share buybacks were more than offset by lower favorable claims in the Insurance Services segment.
Our six-month target price of $42.00 equates to 8.4x our earnings estimate for 2011. Combined with the annual dividend of $0.86 per share, this target price implies a negative return of about 7.2% over that period. This is consistent with our Underperform recommendation on the shares.
STANCORP FNL CP (SFG): Free Stock Analysis Report
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