Smith Barney upgraded UnumProvident (UNM ) to outperform.
On Friday the disabilty and life insurer posted 44 cents first quarter operating earnings per share, and cut its dividend. Analyst Colin Devine says despite the potential for more negative events, including another $500 million of non-recurring charges, he views the cost as more than fully reflected in the share price, which after Friday's drop equals only 0.4 times the book value.
He doesn't think UnumProvident is facing solvency risk; instead he ties the depressed valuation to the market's lack of confidence in current management. He says near-term catalysts are: The successful completion of a planned $900 million share, a debt offering, and the hiring of a new CEO.
Devine is keeping his $1.70 2003 operating earnings per share estimate after cutting it Friday from $1.88; he upped the $1.90 2004 estimate to $2.00, and cut the $8 target to $14.