Aflac guidance triggers Morgan Stanley target cut, long-term outlook steady

Morgan Stanley (NYSE:MS ) reduced its price target for Aflac Inc (NYSE:AFL ) on weaker-than-expected margin guidance revealed during the company’s analyst briefing.

The brokerage reduced price target to $107 from $110, but maintained an "Equal-weight" rating for Aflac.

The revision stems from Aflac's new guidance for its Japan and U.S. operations, which introduced lower margin expectations, Morgan Stanley analysts said. Management attributed the changes to a strategic emphasis on long-term growth.

In Japan, the margin decline is tied to efforts to attract younger customers, reinvestments for growth, and a normalization of margins. Meanwhile, U.S. operations are seeing pressures from higher benefit ratios and expense increases linked to growth initiatives.

Morgan Stanley analysts adjusted their earnings projections accordingly, lowering estimates for Aflac’s earnings per share (EPS) by 4% to 7% across 2025 to 2027. 

While the updated guidance underscores Aflac’s growth-oriented strategy, it also introduces uncertainty into the investment thesis, particularly for those prioritizing near-term margin stability, the research note stated.

Despite these concerns, Morgan Stanley maintained an "Equal-weight" rating, emphasizing that the company’s long-term prospects remain favorable. Aflac’s leadership continues to focus on leveraging demographic trends, such as aging populations and rising healthcare costs, to drive growth in both its Japan and U.S. markets, according to the brokerage.

The insurer also aims to capitalize on its competitive advantages, including strong brand recognition and robust distribution channels. Analysts acknowledged these strengths but noted that it might take time for the market to fully appreciate Aflac's long-term growth potential.

While Aflac's stock could face near-term headwinds, its strategic pivot towards sustainable growth remains a promising narrative, analysts added.

Source: Investing.com