Sun Life Financial Inc. was upgraded to outperform from sector perform at RBC Capital Markets awaiting higher returns on equity, improved earnings power and further growth driven by its Asian and wealth-management businesses.
Analyst Darko Mihelic, who also raised his price target around the stock to $46 from $44, believes these fundamental drivers are not reflected in Sun Life’s current valuation.
“We feel further upside can be done but higher ROE and earnings power need to be first delivered,” he told clients.
Mihelic thinks it’s crucial that institutional outflows at Sun Life’s Boston-based subsidiary MFS Investment Management slow, as they’ve been negative within the last six quarters. However, retail flows continue to be solid, with April’s net mutual fund flows estimated to be $2 billion to the plus side at MFS.
Meanwhile, the analyst’s forecast for Sun Life’s Asian business implies earnings development of 47 percent in 2015 and year-over-year growth of 15 percent? in 2016.