Shares of Lincoln National Corp., which has operations in Hartford, advanced today after a Credit Suisse analyst upgraded the insurer, citing its recent plan to raise capital and its cheap valuation.
Analyst Thomas Gallagher lifted the rating to “outperform” from “neutral” and the price target to $24, up from $21.
Lincoln stock gained $1.10, or about 7 percent, to $16 in afternoon trading.
In a note to investors, Gallagher wrote the Philadelphia company’s plans to raise $2.4 billion — through stock and debt offerings as well as an asset sale — should help it weather a sustained downturn. He also cited Lincoln’s plan to issue preferred stock to the Treasury Department.
“We think the stock is trading at too large of a discount relative to the risk of future dilution and other potential franchise risks associated with having the government as a key stakeholder,” Gallagher wrote.
He noted that there was some hesitation to recommend the shares, since the company’s issuance of preferred shares will likely result in some government supervision for at least eight to nine months.
Still, he noted that Lincoln’s shares nevertheless look “unjustifiably discounted.”
In the year to date, Lincoln shares have declined 21 percent, compared with a gain of just under 1 percent in the benchmark S&P 500 index. (AP)
