Story
Jackson Financial Jumps on Jefferies Upgrade, Citing Market Leverage and Capital Strength
Summary
Jefferies raised its rating on the annuity provider to Buy from Hold and increased its price target to $140, pointing to the company's sensitivity to a strong equity market and a recent $500 million capital injection from TPG.
Shares of Jackson Financial Inc. (NYSE: JXN) rose sharply in premarket trading Friday after Jefferies upgraded the annuity provider to Buy from Hold. The firm also raised its price target on the stock, citing the company's leverage to strong equity markets and an improved capital position.
The Analyst's Call
Jefferies analyst Suneet Kamath raised the firm's price target on Jackson Financial to $140 from a previous $120. The market reacted positively to the news, with JXN shares climbing 8.3% in premarket activity, according to Investing.com.
The upgrade marks a reversal of Jefferies' earlier downgrade to Hold in early 2024, a move which Kamath acknowledged in the new report "was not the right call."
Rationale for the Upgrade
AdThe analyst's renewed confidence is based on several positive developments. Jefferies highlighted three key factors supporting the more bullish outlook:
- Equity Market Tailwinds: With the S&P 500 up a cumulative 58% since the prior rating change, Jackson Financial stands to benefit significantly. The company's earnings profile is considered one of the most highly leveraged to equity market performance within Jefferies' coverage universe.
- Strengthened Capital: A $500 million investment from TPG earlier this year has bolstered the capital structure of Jackson's Brooke Re entity, addressing what the firm called "near-term concerns over that entity’s capitalization."
- Strong Sales Momentum: For the last six quarters, Jackson's annuity sales growth has outpaced both the industry and its peers. Jefferies expects this trend to continue, especially in spread-based annuities, driven by its relationship with TPG.
Context on Previous Concerns
Jefferies' initial downgrade was partly motivated by concerns that the company's Brooke Re solution could reduce transparency for its risk-based capital (RBC). The firm had viewed RBC as one of Jackson's most important key performance indicators. The recent capital injection and sustained performance appear to have alleviated those earlier concerns.