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Why Is Lincoln National (LNC) Down 2.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Lincoln National (LNC - Free Report) . Shares have lost about 2.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Lincoln National due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lincoln National Misses Q2 Earnings Estimates
Lincoln National Corporation reported second-quarter 2022 adjusted earnings of $2.23 per share, which lagged the Zacks Consensus Estimate by 5.1%. The bottom line fell 29.7% year over year.
Adjusted operating revenues of $4,641 million declined 5.3% year over year. However, the top line outpaced the consensus mark by 4.1%.
The quarterly results were hurt by elevated expenses, lower returns from LNC’s alternative investment portfolios, continued high claims experience linked with the COVID-19 pandemic and soft segmental contributions barring the Group Protection one. Nevertheless, the downside was partly offset by sound progress of the Spark expense initiative.
Costs and Expenses
Total expenses of Lincoln National escalated 18.5% year over year to $4,835 million in the second quarter, primarily due to higher costs related to benefits and the Spark program. Benefits account for 59.8% of the quarter’s total expenses.
Segmental Update
The Annuities segment reported operating income of $256 million, which plunged 20.7% year over year in the quarter under review due to a decline in the capital markets and unfavorable one-time items of $14 million. The figure fell short of the Zacks Consensus Estimate of $298 million. Operating revenues of $1,169 million slipped 6.4% year over year but were higher than the consensus mark of $1,100 million. Total annuity deposits decreased 15.8% year over year to $2,702 million.
Operating income in the Retirement Plan Services segment amounted to $54 million, which fell 12.9% year over year in the second quarter. The decline was due to lower returns from the alternative investment portfolio of LNC and a fall in account values. Nevertheless, the downside was partly offset by a decline in expenses and organic growth. The figure was higher than the Zacks Consensus Estimate of $51 million. Operating revenues slid 5.4% year over year to $315 million, higher than the consensus mark of $303 million. Total deposits of $2,943 million improved 6% year over year in the quarter under review, thanks to 10% and 3% rise in first-year sales and recurring deposits, respectively.
The Life Insurance segment’s operating income of $114 million tumbled 55.3% year over year due to reduced returns from the alternative investment portfolio of Lincoln National. The figure was lower than the Zacks Consensus Estimate of $137 million. Operating revenues of $1,800 million fell 11.3% year over year in the second quarter. The figure was lower than the consensus mark of $1,813 million. It is worth mentioning that total Life Insurance sales surged 53% year over year to $193 million on the back of growing sales across all major products. Total deposits of $1,439 million rose 12.6% year over year in the quarter under review.
The Group Protection segment reported operating income of $59 million in the second quarter, up 28.3% year over year. The improvement can be attributed to prudent revenue growth, a better group disability loss ratio and effective expense management. The figure was higher than the Zacks Consensus Estimate of $35.84 million. Operating revenues grew 6.1% year over year to $1,323 million, higher than the consensus mark of $1,312 million. Insurance premiums of $1,187 million climbed 7% year over year. Total sales were $127 million, which soared 61% year over year.
Financial Update (as of Jun 30, 2022)
Lincoln National exited the second quarter with cash and invested cash of $1,567 million, which plunged 34.4% year over year. Total assets of $335.8 billion declined 11.7% year over year.
Long-term debt amounted to $6,498 million, which increased 2.6% year over year. It had no short-term debt at the end of the second quarter. As of Aug 3, 2022, its senior debt received ‘A-‘ and ‘BBB+’ ratings from Standard & Poor’s and Fitch, respectively.
Shareholders’ equity of $9,188 million plunged 57.7% year over year.
Book value per share, excluding accumulated other comprehensive income (AOCI), came in at $79.49. The metric rose 5.4% year over year.
Adjusted operating return on equity excluding AOCI of 11.6% declined 570 basis points year over year.
Capital Deployment Update
Lincoln National rewarded $177 million to its shareholders to the tune of $100 million in share buybacks and paying common dividends worth $77 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Lincoln National has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lincoln National has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Lincoln National belongs to the Zacks Insurance - Life Insurance industry. Another stock from the same industry, Voya Financial (VOYA - Free Report) , has gained 1.7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.
Voya reported revenues of $273 million in the last reported quarter, representing a year-over-year change of -35.6%. EPS of $1.67 for the same period compares with $2.20 a year ago.
Voya is expected to post earnings of $1.18 per share for the current quarter, representing a year-over-year change of -13.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Voya. Also, the stock has a VGM Score of B.
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Why Is Lincoln National (LNC) Down 2.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Lincoln National (LNC - Free Report) . Shares have lost about 2.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Lincoln National due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lincoln National Misses Q2 Earnings Estimates
Lincoln National Corporation reported second-quarter 2022 adjusted earnings of $2.23 per share, which lagged the Zacks Consensus Estimate by 5.1%. The bottom line fell 29.7% year over year.
Adjusted operating revenues of $4,641 million declined 5.3% year over year. However, the top line outpaced the consensus mark by 4.1%.
The quarterly results were hurt by elevated expenses, lower returns from LNC’s alternative investment portfolios, continued high claims experience linked with the COVID-19 pandemic and soft segmental contributions barring the Group Protection one. Nevertheless, the downside was partly offset by sound progress of the Spark expense initiative.
Costs and Expenses
Total expenses of Lincoln National escalated 18.5% year over year to $4,835 million in the second quarter, primarily due to higher costs related to benefits and the Spark program. Benefits account for 59.8% of the quarter’s total expenses.
Segmental Update
The Annuities segment reported operating income of $256 million, which plunged 20.7% year over year in the quarter under review due to a decline in the capital markets and unfavorable one-time items of $14 million. The figure fell short of the Zacks Consensus Estimate of $298 million. Operating revenues of $1,169 million slipped 6.4% year over year but were higher than the consensus mark of $1,100 million. Total annuity deposits decreased 15.8% year over year to $2,702 million.
Operating income in the Retirement Plan Services segment amounted to $54 million, which fell 12.9% year over year in the second quarter. The decline was due to lower returns from the alternative investment portfolio of LNC and a fall in account values. Nevertheless, the downside was partly offset by a decline in expenses and organic growth. The figure was higher than the Zacks Consensus Estimate of $51 million. Operating revenues slid 5.4% year over year to $315 million, higher than the consensus mark of $303 million. Total deposits of $2,943 million improved 6% year over year in the quarter under review, thanks to 10% and 3% rise in first-year sales and recurring deposits, respectively.
The Life Insurance segment’s operating income of $114 million tumbled 55.3% year over year due to reduced returns from the alternative investment portfolio of Lincoln National. The figure was lower than the Zacks Consensus Estimate of $137 million. Operating revenues of $1,800 million fell 11.3% year over year in the second quarter. The figure was lower than the consensus mark of $1,813 million. It is worth mentioning that total Life Insurance sales surged 53% year over year to $193 million on the back of growing sales across all major products. Total deposits of $1,439 million rose 12.6% year over year in the quarter under review.
The Group Protection segment reported operating income of $59 million in the second quarter, up 28.3% year over year. The improvement can be attributed to prudent revenue growth, a better group disability loss ratio and effective expense management. The figure was higher than the Zacks Consensus Estimate of $35.84 million. Operating revenues grew 6.1% year over year to $1,323 million, higher than the consensus mark of $1,312 million. Insurance premiums of $1,187 million climbed 7% year over year. Total sales were $127 million, which soared 61% year over year.
Financial Update (as of Jun 30, 2022)
Lincoln National exited the second quarter with cash and invested cash of $1,567 million, which plunged 34.4% year over year. Total assets of $335.8 billion declined 11.7% year over year.
Long-term debt amounted to $6,498 million, which increased 2.6% year over year. It had no short-term debt at the end of the second quarter. As of Aug 3, 2022, its senior debt received ‘A-‘ and ‘BBB+’ ratings from Standard & Poor’s and Fitch, respectively.
Shareholders’ equity of $9,188 million plunged 57.7% year over year.
Book value per share, excluding accumulated other comprehensive income (AOCI), came in at $79.49. The metric rose 5.4% year over year.
Adjusted operating return on equity excluding AOCI of 11.6% declined 570 basis points year over year.
Capital Deployment Update
Lincoln National rewarded $177 million to its shareholders to the tune of $100 million in share buybacks and paying common dividends worth $77 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Lincoln National has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lincoln National has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Lincoln National belongs to the Zacks Insurance - Life Insurance industry. Another stock from the same industry, Voya Financial (VOYA - Free Report) , has gained 1.7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.
Voya reported revenues of $273 million in the last reported quarter, representing a year-over-year change of -35.6%. EPS of $1.67 for the same period compares with $2.20 a year ago.
Voya is expected to post earnings of $1.18 per share for the current quarter, representing a year-over-year change of -13.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Voya. Also, the stock has a VGM Score of B.