Metlife's Retail Spinoff Still On Track

Argus reiterated its Buy rating and $54 target on Metlife Inc (NYSE: MET) as it has a positive view of MetLife's business diversification, global initiatives and the planned spinoff its retail business, Brighthouse Financial, in the first half of 2017.

The retail business offers insurance policies and variable annuities, which have contributed to losses at MetLife. On October 5, MetLife filed to spin off its U.S. retail unit, Brighthouse Financial, which will be listed as BHP on the NYSE.

Argus expects MetLife to resume share repurchases following the spinoff due to improvements in capital generation and Brighthouse expected payment of a $3.3 billion–$3.8 billion special dividend to MetLife. MetLife also has a record of steady dividend growth, with a current yield of about 3.4 percent.

Related Link: The Street Wonders If Metlife's Near-Term Catalysts Will Be Enough To Meet High Expectations

"We believe that MET, as the industry leader, merits a higher multiple. Our target price of $54 implies a multiple of 9.5-times our 2017 estimate, closer to the industry average," Argus analysts wrote in a note.

The stock currently trades at 8.2-times Argus' 2017 EPS estimate, below the industry average of 10.0. The overhang on SIFI designation is weighing on shares.

"We think the lifting of the SIFI designation will be a long-term value driver as it will free up capital for operational improvements and share buybacks," the analysts added.

At the time of writing, shares of Metlife were down 0.25 percent to $47.04.

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