4 financial sector stocks crushing the S&P 500 in 2022

We find ourselves in a very unique economic environment after a once-in-a-lifetime pandemic.

The Fed’s turn to an aggressive nature coupled with geopolitical uncertainties has brought the bears out of hibernation, driving the bulls out of the arena.

However, financial services companies, such as insurance companies, may see their profit margins expand in higher interest rate environments.

Four stocks from the Zacks Finance sector (Aflac AFL, Cigna Corp. CI, Unum Group UNM and Berkshire Hathaway B (BRK.B)) could be investors’ considerations. Below is a chart illustrating the performance of all four YTD stocks with the combined S&P 500 as the benchmark.

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Let’s dive deeper into each one.

Unum Group

Unum Group offers disability insurance, long-term care insurance, life insurance, and employee-paid group benefits and related services.

Analysts have been bullish on the company’s earnings outlook for the past few months, leading the stock to a favorable Zacks #2 (buy) rating.

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In addition, the company generously rewards its shareholders; UNM’s annual dividend yields a solid 3.2% along with a hefty five-year annualized dividend growth rate of 6.3%.

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UNM shares appear to be more than reasonably priced; The company’s 6.7X future earnings multiple is just a few points above its five-year median, representing a hefty 49% discount relative to its Zacks sector.

The company sports a style score of A for value.

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Aflac

Aflac is an insurance titan, ranking as the largest provider of supplemental insurance in the United States.

Aflac has shown incredible commitment to its shareholders, holding the elite title of Dividend Aristocrat for 39 consecutive years of highest dividend payouts.

The company’s annual dividend yields an industry-leading 2.7%, along with a stellar five-year annualized dividend growth rate of 10.8%.

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Aflac’s current valuation levels are strong, further bolstered by its style score of a B for value. The company’s 10.8X forward price/earnings ratio is well below its five-year median of 11.2X, reflecting an 18% discount relative to its Zacks sector.

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Cigna

Cigna is a global health services company that offers choice, predictability, affordability and access to quality care through integrated capabilities and personalized and connected solutions. CI sports a Zacks Rank #2 (Buy).

Cigna rewards its shareholders through its annual dividend that yields 1.5%. At first glance, that’s considerably lower than the Zacks industry average of 2.6%.

However, the company’s triple-digit 260% five-year annualized dividend growth rate picks up the slack immensely.

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In addition, the company has a favorable growth profile; Earnings are forecast to rise 12.3% in FY22 and another double-digit 10.3% in FY23.

The projected earnings increases come on top of forecast revenue growth of 3.6% and 4.9% for FY22 and FY23, respectively.

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Berkshire Hathaway B

Berkshire Hathaway is a diversified holding company with subsidiaries in insurance, rail, utilities, manufacturing services, retail and homebuilding.

Analysts have upgraded their earnings outlook for the current and next fiscal years over the past several months, helping to put the stock in a favorable Zacks Rank #1 (Strong Buy).

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Stocks are cheap relative to where they resided in the past; shares trade at a forward earnings multiple of 18.9X, nowhere near the five-year median of 22.4X and highs of 27.2X in 2021.

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Additionally, BRK.B has consistently outperformed quarterly estimates, beating the Zacks Consensus EPS estimate in three of its last four earnings releases, with an average double-digit surprise of 17.6%.

Bottom line

In 2022, the shares have plunged due to a difficult economic environment. With inflation at record highs, the Fed was forced to take an aggressive stance, raising lending rates.

In times of high interest rate environments, financial stocks such as insurance providers may see their profit margins expand.

Aflac AFL, Cigna CI, Unum Group UNM and Berkshire Hathaway B (BRK.B) could be considerations for investors fighting a hawkish Fed.

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Berkshire Hathaway Inc. (BRK.B) : Free Stock Research Report

Aflac Incorporated (AFL): Free Stock Analysis Report

Cigna Corporation (CI): Free Stock Analysis Report

Unum Group (UNM): Free Stock Research Report

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