Sector Update: Financial Stocks Edge Higher Premarket Friday

Financial stocks were edging higher premarket Friday as the Financial Select Sector SPDR Fund (XLF) recently advanced by 0.1%.

The Direxion Daily Financial Bull 3X Shares (FAS) was up 0.3% and its bearish counterpart Direxion Daily Financial Bear 3X Shares (FAZ) was 0.2% lower.

Abacus Life shares fell past 9% after the company priced an underwritten public offering of 12.5 million common shares at $8 apiece.

Reinsurance Group of America RGA shares have rallied 41.6% year to date (YTD) compared with the industry's growth of 31.5%. The Finance sector and the Zacks S&P 500 index have returned 20.9% and 24.5% YTD, respectively. With a market capitalization of $15.09 billion, the average volume of shares traded in the last three months was 0.3 million. Currently priced at $229.17, the stock is a little below its 52-week high of $233.14.

RGA Outperforms Industry, Sector, S&P YTD

The rally was driven by its strong momentum in U.S. Traditional, Longevity/PRT, Asia Asset-Intensive and Asia Traditional, along with solid growth projections.

RGA Trading Above 50-Day and 200-Day Moving Average

This Zacks Rank #2 (Buy) life insurer is trading above its 50-day and 200-day simple moving average (SMA) of $218.40 and $203.60, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

Reinsurance Group’s Earnings Surprise History

Reinsurance Group has a decent earnings surprise history. Its earnings beat estimates in each of the last four quarters, with an average surprise of 17.74%.

RGA’s Growth Projection Encourages

The Zacks Consensus Estimate for Reinsurance Group’s 2024 earnings per share indicates a year-over-year increase of 10.3%. The consensus estimate for revenues is pegged at $22.36 billion, implying a year-over-year improvement of 17.4%. The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 3.7% from the corresponding 2024 estimates.

The expected long-term earnings growth rate is 10.4%, outperforming the industry average of 4.6%. RGA has an impressive Growth Score of B. This style score helps analyze the growth prospects of a company.

Reinsurance Group’s Return on Invested Capital

Its return on invested capital (ROIC) has increased every year. This reflects RGA’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 6.4%, higher than the industry average of 0.6%.

Optimistic Analyst Sentiment for RGA

Two of the six analysts covering the stock have raised estimates for 2024, and three analysts have raised the same for 2025 over the past 30 days. The consensus estimate for 2024 and 2025 has moved 0.6% and 1.1% north, respectively, in the past 30 days.

Will RGA’s Rally Stay?

Reinsurance Group is a leader in the U.S. and Latin American traditional markets. It has successfully expanded its product line with market-leading services, capabilities, expertise and innovation. Individual mortality has matured and provides a base for stable earnings and capital generation.

Significant value embedded in the in-force business is anticipated to generate predictable long-term earnings. Product-line expansion contributes to risk diversification.

In Canada, Reinsurance Group is a market leader with solid growth and profitability. It has a sizable block of in-force business, which acts as a significant source of future earnings. Reinsurance Group expects longevity insurance, which is projected to witness steady demand, to experience long-term growth in the Canadian market. While longevity insurance provides a source of diversified income, it also acts as a hedge to a large mortality position.

Demand for protection products among the emerging global middle class and increasing demand for retirement, senior protection and savings products among aging populations create opportunities for growth in new business.

RGA is well-capitalized and has access to multiple forms of capital. RGA expects to remain active in deploying capital in attractive growth opportunities while balancing returning excess capital to shareholders over time.

RGA continues to ramp up technological inclusion with its product. This insurer is a global biometric liability reinsurance leader. Biometrics experience, which includes mortality, morbidity and longevity, over the last five quarters was favorable.

Its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.

RGA has a VGM Score of A. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum. Back-tested results show that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.

Wealth Distribution

This global reinsurer has also been managing capital effectively via share buybacks, dividend payments and prudent investments. RGA expects to remain active in deploying capital into attractive growth opportunities in organic flow and in-force block transactions and returning excess capital to shareholders through dividends and share repurchases. The company exited the second quarter of 2024 with excess capital of around $0.7 billion, reflecting a solid capital position.

Other Key Picks

Investors interested in the life insurance industry may look at some other top-ranked players like Abacus Life, Inc. ABL, Manulife Financial Corp MFC and Primerica, Inc. PRI, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Abacus Life’s 2024 and 2025 earnings implies year-over-year growth of 19.2% and 22.4%, respectively. The Zacks Consensus Estimate for 2024 and 2025 revenues implies year-over-year growth of 33.1% and 57%, respectively. Year to date, shares of ABL have lost 9.8%.

The Zacks Consensus Estimate for Manulife Financial’s 2024 and 2025 earnings implies year-over-year growth of 6.6% and 9.2%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 5.36%. Year to date, shares of MFC have risen 47.9%.

The Zacks Consensus Estimate for Primerica’s 2024 and 2025 earnings implies year-over-year growth of 18.9% and 7.9%, respectively. It beat earnings estimates in two of the past four quarters and missed in two, with an average surprise of 4.89%. Year to date, shares of PRI have climbed 44.3%.

Zacks Investment Research

The broad market exchange-traded fund SPDR S&P 500 ETF Trust was down 0.1% and the actively traded Invesco QQQ Trust slipped 0.2% in Friday's premarket activity, ahead of business activity data due later in the day.

US stock futures were also lower, with S&P 500 Index futures retreating 0.1%, Dow Jones Industrial Average futures slipping 0.02%, and Nasdaq futures losing 0.2% before the start of regular trading.

The flash Composite Purchasing Managers' Index for November will be released at 9:45 am ET, followed by the University of Michigan's November consumer sentiment bulletin at 10 am ET.

The weekly Baker Hughes domestic oil-and-gas rig count will be released at 1 pm ET.

In premarket activity, bitcoin was up by 0.4% and the cryptocurrency fund ProShares Bitcoin Strategy ETF was 0.6% higher.

Power Play:

Health Care

The Health Care Select Sector SPDR Fund advanced 0.1%. The Vanguard Health Care Index Fund and the iShares US Healthcare ETF were inactive. The iShares Biotechnology ETF declined marginally by 0.02%.

Modular Medical stock was down 11% premarket after the company said late Thursday it priced its public offering of around 5.5 million shares at $1.50 apiece.

Winners and Losers:

Financial

Financial Select Sector SPDR Fund was flat. Direxion Daily Financial Bull 3X Shares was up 0.1%, while its bearish counterpart Direxion Daily Financial Bear 3X Shares was flat.

Abacus Life shares were down 5% pre-bell Friday after the company said late Thursday that it priced an underwritten public offering of 12.5 million common shares at $8 apiece.

Technology

Technology Select Sector SPDR Fund retreated 0.2%, and the iShares US Technology ETF was inactive, while the iShares Expanded Tech Sector ETF gained by 0.03%. Among semiconductor ETFs, SPDR S&P Semiconductor ETF was inactive, while the iShares Semiconductor ETF declined 0.1%.

StoneCo shares were down 4% in recent Friday premarket activity after the company said late Thursday it authorized the repurchase of up to 2 billion Brazilian reais ($343.9 million) in outstanding Class A common shares.

Consumer

The Consumer Staples Select Sector SPDR Fund was marginally down by 0.04%, while the Vanguard Consumer Staples Fund was inactive. The iShares US Consumer Staples ETF was inactive, and the Consumer Discretionary Select Sector SPDR Fund gained 0.2%. The VanEck Retail ETF was inactive, while the SPDR S&P Retail ETF advanced 0.2%.

Tapestry shares were up 3.2% pre-bell after the company said it signed accelerated share repurchase deals with Bank of America (BAC) and Morgan Stanley (MS) to buy back $2 billion of its common shares.

Industrial

Industrial Select Sector SPDR Fund retreated marginally by 0.01% while the Vanguard Industrials Index Fund and the iShares US Industrials ETF (IYJ) were inactive.

EHang Holdings stock was up 2.3% before the opening bell after the company said its board approved a share repurchase program of up to $30 million of its American depositary shares or ordinary shares over the next 12 months.

Energy

The iShares US Energy ETF was inactive, while the Energy Select Sector SPDR Fund was down by 0.2%.

Equinor stock was down 1.6% before Friday's opening bell after the company said it is reducing its renewable energy unit's staff by 20%, the equivalent of nearly 250 full-time jobs.

Commodities

Front-month US West Texas Intermediate crude oil retreated 0.7% to $69.58 per barrel on the New York Mercantile Exchange. Natural gas fell 2.6% to $3.25 per 1 million British Thermal Units. United States Oil Fund lost 0.7%, while the United States Natural Gas Fund was 2.3% lower.

Gold futures for February were up nearly 1% at $2,724.70 an ounce on the Comex, while silver futures advanced 1.3% to $31.78 an ounce. SPDR Gold Shares gained 1.2%, and iShares Silver Trust was 1.9% higher.