Acquisitions And Net Inflows Will Secure Wealth And Health Solutions

Key Takeaways

• Strategic acquisitions and organic growth in Wealth Solutions and Investment Management are expected to drive revenue and earnings growth through increased market share and diversification.
  
• Strong cash flow and financial stability enable strategic investments and debt reduction, potentially enhancing earnings per share through improved operational efficiency.
  
• Mixed economic signals and market volatility present risks to Voya Financial's revenue stability, potentially impacting earnings forecasts across multiple segments.

Catalysts

Provides workplace benefits, and savings solutions and technologies in the United States and internationally.

• The acquisition of OneAmerica and the addition of $60 billion in assets is expected to enhance Voya Financial's revenue streams and drive future earnings through increased market share in Wealth Solutions.
  
• Ongoing commercial momentum in Wealth Solutions, highlighted by $30 billion in organic net inflows and strong pipeline commitments, suggests potential for sustained revenue growth and improved net margins due to economies of scale.
  
• Investment Management's robust net cash inflows of $7.7 billion across diverse strategies, including institutional and retail channels, indicate potential for increased revenue and earnings growth, reinforcing the company's long-term organic growth target.
  
• Efforts to stabilize Health Solutions’ Stop Loss experience and improve margins show promise for future earnings growth through cost management and underwriting improvements, potentially lifting net margins.
  
• Strong free cash flow generation and a healthy balance sheet facilitate strategic investments and debt reduction, supporting future earnings per share (EPS) growth through operational efficiency and financial flexibility.

Voya Financial Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Voya Financial's revenue will decrease by 0.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.8% today to 12.0% in 3 years time.
• Analysts expect earnings to reach $979.7 million (and earnings per share of $11.6) by about May 2028, up from $626.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.9x on those 2028 earnings, down from 9.3x today. This future PE is lower than the current PE for the US Diversified Financial industry at 14.2x.
• Analysts expect the number of shares outstanding to decline by 5.14% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.5%, as per the Simply Wall St company report.

Voya Financial Future Earnings Per Share Growth

Risks

• Economic signals have been mixed, and market volatility has remained elevated, leading the company to proceed with caution, which could affect its revenue and earnings forecasts.
  
• Equity market fluctuations may impact second-quarter AUM balances and, consequently, revenues in the Wealth Solutions segment.
  
• Alternative income was below long-term expectations, and this trend is expected to continue, potentially impacting overall earnings for the company.
  
• Elevated claims in the Group Life segment and the need to increase reserves in Voluntary highlight uncertainties that might affect future margins and earnings stability.
  
• The company acknowledges a more complex environment than seen in some time, which may pose risks to achieving its strategic priorities and sustaining current revenue streams.

Valuation

• The analysts have a consensus price target of $74.182 for Voya Financial based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $89.0, and the most bearish reporting a price target of just $60.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $8.2 billion, earnings will come to $979.7 million, and it would be trading on a PE ratio of 7.9x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of $60.24, the analyst price target of $74.18 is 18.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.