Why Is Aflac (AFL) Up 8.9% Since Last Earnings Report?

It has been about a month since the last earnings report for Aflac (AFL). Shares have added about 8.9% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Aflac due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. Aflac Q3 Earnings Top Estimates on Lower Benefits & ExpensesAflac reported third-quarter 2024 adjusted earnings per share of $2.16, which beat the Zacks Consensus Estimate by 27.1%. Also, the bottom line increased 17.4% year over year.Aflac’s revenues decreased from $5 billion in the year-ago quarter to $2.9 billion in the quarter under review. The top line missed the consensus mark by 36.6%.Strong quarterly earnings were supported by lower operating expenses and higher investment income, signaling the company’s effective investment strategies. While lower benefits and claims aided the Aflac Japan segment, higher benefits from incurred claims and lower remeasurement gains impacted the Aflac U.S. segment, partially offsetting the positives.Q3 PerformanceAdjusted net investment income increased 2.3% year over year to $936 million.Total net benefits and claims of $1.6 billion decreased 14.2% year over year in the third quarter. Total acquisition and operating expenses decreased 1.8% year over year to $1.3 billion.Pre-tax earnings plunged 94.9% year over year to $92 million in the third quarter.Inside AFL’s SegmentsAflac Japan: The segment’s adjusted revenues decreased 10.6% year over year to $2.4 billion in the quarter under review and missed the Zacks Consensus Estimate by 5%. Total net earned premiums of $1.7 billion dropped 13.4% year over year due to changes in deferred profit liability, limited pay products attaining paid-up status and the implementation of a reinsurance transaction earlier.Adjusted net investment income decreased 2.5% year over year to $662 million. Pre-tax adjusted earnings of the segment amounted to $1.1 billion, which increased 23.5% year over year in the third quarter. This metric beat the consensus mark by 35.5%.New annualized premium sales of $117 million improved 12.3% year over year due to strong new first-sector sales. The benefit ratio of the segment was 49.2% in the third quarter.Aflac U.S.: The segment’s adjusted revenues increased 1.4% year over year to $1.7 billion in the quarter under review. However, this missed the Zacks Consensus Estimate by 0.9%. Total net earned premiums climbed 2.8% year over year to $1.5 billion due to sales recovery and improving persistency.Adjusted net investment income of $210 million climbed 0.5% year over year. Pretax adjusted earnings of the segment were $350 million, down 26.8% year over year in the third quarter due to higher benefits recognized. The metric missed the Zacks Consensus Estimate by 4.7%.Aflac’s U.S. sales of $379 million rose 5.5% year over year. The third-quarter benefit ratio came in at 47.6%.Financial Position (As of Sept. 30, 2024)Aflac exited the third quarter with total cash and cash equivalents of $5.6 billion, which increased from $4.3 billion at 2023-end. Total assets rose to $128.4 billion from $126.7 billion at 2023-end.Adjusted debt increased to $7.7 billion from $6.8 billion at 2023-end. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, was 23.7%, which deteriorated 130 basis points (bps) from 2023-end. While the company had no debt maturities in less than a year, total debt maturities worth $1.8 billion are expected within the next five years.Total shareholders' equity of $24.8 billion increased from $22 million at 2023-end.Adjusted book value per share decreased 2% year over year to $51.21. Adjusted return on equity, excluding foreign currency impacts of 17%, improved 140 bps year over year.Capital DeploymentAflac bought back 4.9 million shares worth $500 million in the third quarter. It had 54.3 million shares left for buyback as of the third-quarter end.Management announced dividends of 50 cents per share for the fourth quarter. The dividend will be paid out on Dec. 2, 2024, to shareholders of record as of Nov. 20.OutlookAflac estimates improved sales in its Japan business for 2024, buoyed by its focus on third-sector products and introducing these to younger customers. Management remains optimistic about profitable growth within its U.S. business. Improving productivity, underwriting discipline and expense management are likely to bolster its margins. New products and distribution strategies are expected to benefit both segments.AFL expects a benefit ratio of 62-63% for the Aflac Japan unit in 2024. The same in Aflac U.S. is likely to be 45-47%.The expense ratio for Aflac Japan and Aflac U.S. is estimated at 19-21% and 38-40%, respectively, for 2024.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in estimates revision.VGM ScoresCurrently, Aflac has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Aflac has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.Performance of an Industry PlayerAflac is part of the Zacks Insurance - Accident and Health industry. Over the past month, Unum (UNM), a stock from the same industry, has gained 20.1%. The company reported its results for the quarter ended September 2024 more than a month ago.Unum reported revenues of $3.22 billion in the last reported quarter, representing a year-over-year change of +3%. EPS of $2.13 for the same period compares with $1.94 a year ago.Unum is expected to post earnings of $2.13 per share for the current quarter, representing a year-over-year change of +19%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.3%.The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Unum. Also, the stock has a VGM Score of C.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. Nuclear energy is an ideal replacement.Leaders from the US and 21 other countries recently committed to TRIPLING the world’s nuclear energy capacities. 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