Barclays Upgrades Brighthouse Financial, Inc. (BHF) to Overweight

Barclays analyst Alex Scott upgraded Brighthouse Financial, Inc. (NASDAQ: BHF) from Equalweight to Overweight with a price target of $85.00 (from $52.00).

The analyst comments "Summary: On the morning of January 28th, the Financial Times released a piece stating Brighthouse was in the process of exploring a sale and were entertaining bids from prominent private capital managers. BHF management has not commented on the speculation. This does not come as a complete surprise to us (highlighted in our variable annuity note) considering Brighthouse has struggled with meeting their cash flow projections and have experienced RBC turbulence ever since spinning out of Metlife eight years ago. Although BHF is up ~14% on the news, we believe that there remains ~45% more upside potential to current levels and if a deal were to fall through, we would expect BHF to retrace back to ~$50 (our downside case), an area that it has traded at for some time. Therefore with a risk:reward of nearly 1:3, we are upgrading BHF to Overweight (from Equal Weight) and increasing our price target to $85 (from $52). Our target price is based, on applying a 14% discount rate to BHF's cash flows and adding a $1.25 billion premium for the distribution platform. We also cross-reference this valuation methodology and arrive at a similar share price from using a 4.2x (previously 2.6x) weighted average P/E multiple on our NTM+1 (FQ5-8) estimated operating earnings (Annuities 3.7x, Life 5.5x, Run-Off no value, 3.7x Corporate & Other; previously Annuities 2.1x, Life 5.5x, Run-Off no value, 2.3x Corporate & Other). The addition of the DCF to our valuation methodology allows us to look at BHF from multiple angles."

For an analyst ratings summary and ratings history on Brighthouse Financial, Inc. click here. For more ratings news on Brighthouse Financial, Inc. click here.

Shares of Brighthouse Financial, Inc. closed at $58.33 yesterday.

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