After a poor start to the session, the Suncorp Group Ltd (ASX: SUN) share price has found its legs and is charging higher in afternoon trade.
So much so, the banking and insurance giant's shares have just climbed 5% to a 52-week high of $13.12.
Why is the Suncorp share price charging higher?
Investors have been bidding the Suncorp share price higher today following the release of the company's half year results.
For the six months ended 31 December, Suncorp delivered a 9% increase in Australian gross written premium (GWP) to $4.8 billion, a 12.2% lift in New Zealand GWP to NZ$1.2 billion, and a 10.4% lift in home lending.
This underpinned a 44.3% increase in net profit after tax to $560 million and a 62.9% jump in cash earnings to $588 million, allowing the Suncorp board to increase its fully franked interim dividend by 43.5% to 33 cents per share.
While this looks exceptionally strong on paper, it actually fell short of consensus expectations. This appears to have been what weighed on the Suncorp share price in early trade.
However, analysts have been looking closer at the result and appear pleased with what they saw, which goes some way to explaining the share price turnaround.
Broker reaction
Goldman Sachs notes that Suncorp's headline result fell short of expectations. It commented:
Profit after tax from business lines for 1H23 came in at A$615m vs. GSe A$690m (SUN consensus of A$655m). Most of the miss on reported result was in the general insurance space which we note was due to a reported margin miss (9.2% vs. GSe at 10.8%) impacting both AUS and NZ.
However, the broker also highlights that Suncorp delivered a much stronger than expected result on an underlying basis. It said:
On an underlying basis, however, the result was ahead at 10% vs. GSe at 9.7% for 1H23. Most of the beat against our numbers on an underlying basis appeared to come from expense leverage on the expense ratio and investment income with a beat driven by inflation linked bonds earning 1.03% over the half (benefits in an inflationary environment).
Goldman currently has a buy rating and $13.88 price target on the company's shares. This suggests that the Suncorp share price could still rise 6% from its 52-week high.
Though, it is worth remembering that the broker could update its rating (negative or positively) in the coming days after updating its financial model.
