Sun Life Financial (SLF) fell 8% on a post-Q2 downgrade, driven by a weaker outlook for its U.S. dental business - with management dropping its earnings guide below $100M for the year and pulling its $250M target for 2029.
So in light of the near-term uncertainties that I referenced in my opening remarks, particularly around Medicaid and the repricing, we’re having to reforecast our earnings outlook for the business.
The segment headwinds were felt on three fronts: a $60M impairment charge linked to the early termination of a contract, slower repricing of rates by state authorities, and higher claims activity as people front-run a potential loss in coverage.
With >$3B of intangibles & goodwill linked to SLF’s $3.1B DentaQuest acquisition, investors are likely worried that continued challenges will result in a write-down. But with SLF shedding $4B in market cap on Friday…
… trading at a discount on forward earnings, and having a pretty strong capital cushion, there’s likely upside if the company can mitigate these near-term challenges - especially considering U.S. dental accounts for <5% of earnings.
