Travelers (TRV) Positioned to 'Continue Outperforming' - Raymond James

Raymond James analyst Gregory Peters upgraded shares of Travelers (NYSE: TRV) to Strong Buy from Market Perform, initiating a $185 per share price target in a note Monday.

Following the Raymond James note, TRV shares climbed more than 2%.

Peters said the firm is maintaining its 2022E operating EPS of $13.30 and raising its 2023E operating EPS to $14.40 from $14.35. Raymond James also initiated its 2024 operating EPS estimate of $16.20.

"The stock has outperformed YTD, down 0.01% compared with the S&P 500 (-16.9%) and the Dow 30 (-12.2%). We believe TRV could be positioned to continue outperforming on a relative basis," said Peters. "The Street currently expects margin expansion for 22/30 companies in the Dow Jones Index for 2023, yet the Street has reduced their margin expansion expectations in 2023 for 15 of the 22 companies since January 1, 2022. We believe TRV could be positioned to report results above consensus in 2H23 and 2024 due to previous and continuing rate actions in the BI and BS segments (48% and 11% of total premium), current and projected rate increases in the PI segment, and the impact of higher yields on NII."

Peters added that as a result, they believe TRV could be positioned to report ROEs at the high end of its target ROE range of 13-15%.

"The stock's current valuation is attractive relative to its 5-year average and peers (current P/E: 10.9x 2023E EPS vs. 5-year average: 13.5x and peer average: 12.7x 2023E EPS) despite TRV generating an average annualized operating ROE of 12.6% over the last ten years, ahead of most of the other publicly traded large-cap P&C insurers."

By Sam Boughedda

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