BMO Capital has recently raised its price target for American International Group (AIG) shares, setting it at $89.00, up from the previous $88.00, while maintaining an Outperform rating on the stock. This adjustment is based on the firm’s analysis of AIG’s future earnings potential, with a particular focus on the year 2026.
The assessment indicates that AIG’s current valuation is relatively undervalued when considering the projected earnings for 2026. The estimated price-to-earnings ratio for that year is around 8.8 times, which is lower than the industry average of over 10 times.
BMO Capital highlights the significance of 2026 for AIG, as it is expected to finalize the monetization of its significant life insurance stake and reap the benefits of ongoing cost efficiency measures.
By 2026, AIG is forecasted to have maximized its excess capital and achieved a more competitive expense structure compared to its competitors. The firm predicts a substantial increase in earnings per share (EPS) for AIG, with a projected growth of over 40% from 2023 to 2026.
The analysis acknowledges the challenge of determining the appropriate discount rate for the future earnings, which is crucial in the valuation model.
BMO Capital’s revised price target reflects its confidence in AIG’s strategic initiatives and its potential to deliver enhanced shareholder value in the upcoming years. The projections are backed by detailed financial analysis, including an evaluation of AIG’s cost efficiency plans and their impact on the company’s EPS growth trajectory.
InvestingPro Insights
BMO Capital’s positive outlook on American International Group is further supported by real-time data and insights from InvestingPro. AIG’s management’s commitment to enhancing shareholder value through share buyback activities and high shareholder yield aligns with BMO Capital’s confidence in AIG’s strategic moves to improve its financial position and increase EPS in the years ahead.
The current P/E ratio of the company stands at 11.9, with a slight adjustment to 11.33 over the past twelve months as of Q1 2024. This supports BMO Capital’s view of AIG’s discounted valuation. Additionally, AIG has maintained dividend payments for 12 consecutive years, with a significant growth rate of 25.0% during the same period, offering a dividend yield of 2.0%, appealing to income-focused investors.
Recent data from InvestingPro shows a substantial price rise in AIG’s shares in the last six months, with a 6-month price total return of 26.98%, trading near its 52-week high at 99.12% of the peak. This upward trend indicates the market’s acknowledgment of the company’s profitability over the last twelve months and its growth potential, as anticipated by analysts for this year.
For detailed insight into AIG’s financials and future prospects, additional InvestingPro Tips are accessible, providing a comprehensive analysis of the company’s performance and position. To leverage these insights for your investment strategy, use the coupon code PRONEWS24 to avail an extra 10% discount on a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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