Own Suncorp (ASX:SUN) shares? Here’s what top analysts are saying

Here’s what these leading analysts are saying about the outlook for the company and its share price
The post Own Suncorp (ASX:SUN) shares? Here’s what top analysts are saying appeared first on The Motley Fool Australia. –

Shares in Suncorp Group Ltd (ASX: SUN) have started the new year well and are up 6% since January 1.

Suncorp shares have opened Thursday’s session at $11.73 today after pre-market activity, having climbed from a low of $10.65 back in December. However, the bank still has some headroom before touching 52-week highs of $12.94 back in October last year.

But the macro-narrative is shifting in 2022 to one of inflation, interest rates, and how this impulse will direct fund flows in financial markets.

The market is pricing in 3 to 4 rate hikes from the US Fed in 2022 according to market data, spurred on by language from US Fed chair Jerome Powell and minutes from the most recent Federal Open Market Committee (FOMC) meeting.

As such, the market looks as if it’s pricing in the impact of these rate hikes, and there’s been a corresponding rotation out of tech and high-growth into sectors that have the highest correlation to US Treasury yields this year.

The top segment in this regard according to research from JP Morgan is the financials sector, which, unsurprisingly, has seen the largest fund flows since we rolled into 2022.

For instance, the Financial Select Sector SPDR Fund (NYSEARCA: XLF) recorded the highest net inflows of any listed product last week, reaching a total of $2.34 billion.

Moreover, the S&P/ASX 200 Financials Index (XFJ) has climbed 1.5% this year to date after rallying 3% in the past month.

So investors are starting to park their hard earned capital into the more defensible pockets of the market. How does this bode in for the Suncorp share price? Here’s what Morgan Stanley and JP Morgan had to say in recent notes to investors.

What’s the chatter from analysts?

The team at JP Morgan are neutral on Suncorp, although reckon that the bank could benefit from macroeconomic factors currently impacting the industry, such as reduced motor claims from COVID-19 lockdowns.

Aside from that, the broker says Suncorp’s margins are likely to benefit in 3 to 4 core areas going forward. It reckons Suncorp will see margin expansion in home personal and commercial lines, alongside incremental benefits from perils allowances and expenses.

Given the talk on industry-wide pressures to net interest margins (NIMs) in 2022 for the ASX banking sector, JP Morgan notes this is a positive to Suncorp’s investment debate.

However, it views these positive trends alongside “some margin degradation in CTP [compulsory third party insurance]”.

The firm is also cautious on Suncorp’s Australian personal lines business, and questions if the bank’s cost-to-income targets are a little too optimistic.

Although it remains neutral on Suncorp, it values the bank at $13.30 per share, after applying a risk adjustment to its discounted cash flow (DCF) valuation of $14.32 and franking credits at 70%.

It applies this discount to “reflect adverse events such as heavy rains and flooding in NSW that pose some downside risk and may cause the market some concerns about [Suncorp’s] exposure”.

Meanwhile, the team at Morgan Stanley are also neutral on Suncorp shares. However, the investment bank just completed its analysis of 2021 home and motor new business pricing for Q4 2021, noting Suncorp’s more competitive pricing versus competitors.

Yet, Morgan Stanley also reckons the savings pool from Suncorp’s motor savings may have largely dried up, and as such, it sees “margin risks from higher claims and input costs, unless pricing improves or Suncorp achieves larger cost savings”.

It values the company at $11.90 per share and joins the likes of Morgans and Barclay Pearce Capital in its neutral stance.

Consensus is still bullish

Despite the neutral sentiment, Macquarie, Jarden and Credit Suisse still tip the Suncorp share price to outperform in 2022.

In fact, the overall sentiment appears to be bullish, according to a list of analysts provided by Bloomberg Intelligence. For instance, 61.8% of coverage has it as a buy, whereas the other 38.5% has it as a hold.

There are no services recommending that their clients sell Suncorp in the list of analysts utilised for this report.

As such, the group has a consensus price target of $13.05.

In the past 12 months, the Suncorp share price has climbed 9% after rallying 8% in the last month.

The post Own Suncorp (ASX:SUN) shares? Here’s what top analysts are saying appeared first on The Motley Fool Australia.

Should you invest $1,000 in Suncorp Group right now?

Before you consider Suncorp Group, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Suncorp Group wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

Could this impact the performance of ASX 200 banks more than interest rates in 2022?

Analysts name 2 ASX 200 dividend shares to buy

Why analysts love these ASX 200 blue chip shares

The author has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!