Aviva gets a boost from Charles Stanley upgrade

Aviva got a boost on Wednesday as Charles Stanley upgraded the stock to ‘accumulate’ from ‘hold’.

“While we have doubts over the group’s long term strategic positioning, the stock appears too cheap to ignore at current levels, trading on under 8x FY17 operating EPS and offering a FY17 yield of around 6.5%,” it said.

Charles Stanley added that it sees a possible 40%+ total return opportunity to its 590p price target on an 18-24 month view.

It noted that Aviva has not escaped the general equity market correction in August and September, falling by more than 15% and underperforming both the FTSE 100 and the UK Life Sector.

This is despite the company reporting first-half operating profit of £1.17bn in August, up 9% on the same period last year and 6% ahead of consensus expectations.

The brokerage said management remains confident of delivering overall run-rate synergies of £225m per annum from the integration of Friends Life, which should drive robust EPS growth from full-year 2015.

“Cash flow has been enhanced by the Friends Life acquisition and should support double-digit per annum growth in the dividend over coming years, building on the 15% increase in the interim dividend,” it said.

At 0940 BST, Aviva shares were up 3.5% at 443.50p.