Analysts at Deutsche Bank lowered their target price on insurance group Direct Line from 290.0p to 240.0p following the company’s trading update.
Deutsche Bank noted that Direct Line had warned on everything it was worried about and more – including its earnings outlook from now until the end of 2023, a flat ordinary interim dividend per share, the removal of the second £50.0m tranche of its buyback and a solvency ratio at 150%, its lowest since 2015.
“Altogether, with potential consensus downgrades in the order of circa 25% in 2022e and circa 15% in 2023-2024e, we think it is unsurprising that the shares are off 13% today, and we note that this is incremental to the -12% at the time of Sabre’s (not covered) profit warning last Thursday,” said DB.
Looking forward, the German bank believes that although Direct Line appears “incredibly lowly rated” at a 12.2% 2023 ordinary dividend yield against its historical average, it “could be a while” before it sees any real re-rating as the firm’s COR guidance and capital outlook remains “constrained”.
Reporting by Iain Gilbert at Sharecast.com
