It has been about a month since the last earnings report for Torchmark Corporation . Shares have lost about 1.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Torchmark Tops Q1 Earnings & Revenues, Guides 2017
Torchmark's first-quarter 2017 net operating income of $1.15 per share beat the Zacks Consensus Estimate by a penny. Earnings also improved 6.5% year over year on the back of higher premiums from the Life and Health segments. Lower share count due to continuous buy backs also drove the upside.
Including net realized losses on investments from continuing operations of $0.01, favorable Medicare Part D adjustment of $0.03, net income grew 10% year over year to $1.11 per share.
Behind the Headlines
Torchmark reported total premium revenue of $821 million, up 5.3% year over year. The upside was primarily driven by higher premiums from Life and Health Insurance businesses.
Net investment income increased 5.9% year over year to $208 million.
The company’s total revenue of $1.029 billion inched up 5.3% from the year-ago quarter. The top-line improvement was driven by growth in Life and Health Insurance premiums along with higher net investment income. However, revenues surpassed the Zacks Consensus Estimate of $1.009 billion.
Excess investment income, a measure of profitability, grew 8% year over year to $59.3 million.
Torchmark’s total insurance underwriting income dipped 1% year over year to $148.6 million. Though Health and Annuity Insurance underwriting margins improved, higher administrative expenses resulted in lower total insurance underwriting income.
Administrative expenses increased 7% year over year to $51.9 million.
Total benefits and expenses rose 6.4% year over year to $832 million.
Segment Update
Premium revenues at Torchmark's Life Insurance operations increased 5.9% year over year to $576 million. The improvement can be attributed to higher premiums written by the distribution channels – American Income Agency and Direct Response. While American Income Agency grew 9%, Direct Response increased up 5%. Life Insurance underwriting income was almost flat year over year at $144.1 million. Net sales at the life insurance segment was 2% higher on a year-over-year basis.
Health Insurance premium revenues rose 3.8% year over year to $245 million, while underwriting income of $53.4 million increased 3.7% year over year. Net health sales grew 21% year over year.
Annuity underwriting margins surged 63% year over year to $2.6 million.
Financial Update
Shareholders’ equity as of Mar 31, 2016 climbed 4.2% year over year to $3.9 billion.
Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $32.77, up 6.9% year over year.
As of Mar 31, 2017, operating return on equity was 14.2% compared with 14.5% as of Mar 31, 2016.
Share Repurchase and Dividend Update
In the quarter, Torchmark repurchased 1.1 million shares for a total cost of $82 million.
The company declared a dividend of 15 cents per share in the quarter, which marks a 7.1% hike from the year-ago quarter.
Guidance
Torchmark estimates net operating income from continuing operations between $4.63 and $4.77 per share in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower.
Torchmark Corporation Price and Consensus
VGM Scores
At this time, Torchmark's stock has a nice Growth Score of 'B', though it is lagging on the momentum front with a 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Torchmark (TMK) Down 1.9% Since the Last Earnings Report?
It has been about a month since the last earnings report for Torchmark Corporation . Shares have lost about 1.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Torchmark Tops Q1 Earnings & Revenues, Guides 2017
Torchmark's first-quarter 2017 net operating income of $1.15 per share beat the Zacks Consensus Estimate by a penny. Earnings also improved 6.5% year over year on the back of higher premiums from the Life and Health segments. Lower share count due to continuous buy backs also drove the upside.
Including net realized losses on investments from continuing operations of $0.01, favorable Medicare Part D adjustment of $0.03, net income grew 10% year over year to $1.11 per share.
Behind the Headlines
Torchmark reported total premium revenue of $821 million, up 5.3% year over year. The upside was primarily driven by higher premiums from Life and Health Insurance businesses.
Net investment income increased 5.9% year over year to $208 million.
The company’s total revenue of $1.029 billion inched up 5.3% from the year-ago quarter. The top-line improvement was driven by growth in Life and Health Insurance premiums along with higher net investment income. However, revenues surpassed the Zacks Consensus Estimate of $1.009 billion.
Excess investment income, a measure of profitability, grew 8% year over year to $59.3 million.
Torchmark’s total insurance underwriting income dipped 1% year over year to $148.6 million. Though Health and Annuity Insurance underwriting margins improved, higher administrative expenses resulted in lower total insurance underwriting income.
Administrative expenses increased 7% year over year to $51.9 million.
Total benefits and expenses rose 6.4% year over year to $832 million.
Segment Update
Premium revenues at Torchmark's Life Insurance operations increased 5.9% year over year to $576 million. The improvement can be attributed to higher premiums written by the distribution channels – American Income Agency and Direct Response. While American Income Agency grew 9%, Direct Response increased up 5%. Life Insurance underwriting income was almost flat year over year at $144.1 million. Net sales at the life insurance segment was 2% higher on a year-over-year basis.
Health Insurance premium revenues rose 3.8% year over year to $245 million, while underwriting income of $53.4 million increased 3.7% year over year. Net health sales grew 21% year over year.
Annuity underwriting margins surged 63% year over year to $2.6 million.
Financial Update
Shareholders’ equity as of Mar 31, 2016 climbed 4.2% year over year to $3.9 billion.
Torchmark reported book value per share (excluding net unrealized gains on fixed maturities) of $32.77, up 6.9% year over year.
As of Mar 31, 2017, operating return on equity was 14.2% compared with 14.5% as of Mar 31, 2016.
Share Repurchase and Dividend Update
In the quarter, Torchmark repurchased 1.1 million shares for a total cost of $82 million.
The company declared a dividend of 15 cents per share in the quarter, which marks a 7.1% hike from the year-ago quarter.
Guidance
Torchmark estimates net operating income from continuing operations between $4.63 and $4.77 per share in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower.
Torchmark Corporation Price and Consensus
Torchmark Corporation Price and Consensus | Torchmark Corporation Quote
VGM Scores
At this time, Torchmark's stock has a nice Growth Score of 'B', though it is lagging on the momentum front with a 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.