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American Equity (AEL) Up 23.1% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for American Equity Investment (AEL - Free Report) . Shares have added about 23.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American Equity due for a pullback? 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.
American Equity Q3 Earnings Top Estimates, Decrease Y/Y
American Equity Investment Life Holding Company reported third-quarter 2022 adjusted net earnings of 99 cents per share, which beat the Zacks Consensus Estimate by 17.8%. The bottom line decreased 32.2% year over year.
The quarterly results reflected higher annuity product charges, net investment income and lower expenses, offset by lower premiums and other considerations.
Operational Update
Operating total revenues were $684.4 million, up 12.5% year over year on the back of higher annuity product charges, net investment income and other revenues.
Premiums and other considerations decreased 82.1% year over year to $2.8 million. Annuity product charges increased 4% year over year to $60.8 million.
Net investment income increased 15.8% on a year-over-year basis to $609.7 million. The upside was due to an increase in the average yield on investments resulting from strong returns from partnerships, the benefit from higher short-term interest rates on a floating rate portfolio, lower cash balances and an increase in allocation to higher yielding privately sourced assets to 18.4% of the investment portfolio.
Total benefits and expenses were $93 million, which decreased 73.1% from the year-ago quarter due to lower insurance policy benefits and change in future policy benefits, interest-sensitive and index product benefits and interest expense on subordinated debentures. The investment spread was 2.73%, up from 2.40% in the year-ago quarter.
Financial Update
Cash and cash equivalents were $1.8 billion as of Sep 30, 2022, down 60% from 2021-end. Total investments were about $51.4 billion, which decreased 14.8% from 2021-end. Notes payable totaled $794.8 million, up 60.2% from 2021-end.
Book value per common share, excluding AOCI, was $54.93, up 34.6% from 2021-end. Total debt/total capitalization was 13.9%, deteriorating 250 basis points from 2021-end. Operating return on equity, excluding average AOCI, was 10.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, American Equity has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. 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 C. 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. Notably, American Equity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
American Equity is part of the Zacks Insurance - Life Insurance industry. Over the past month, Lincoln National (LNC - Free Report) , a stock from the same industry, has gained 8.2%. The company reported its results for the quarter ended September 2022 more than a month ago.
Lincoln National reported revenues of $4.63 billion in the last reported quarter, representing a year-over-year change of -11.1%. EPS of -$10.23 for the same period compares with $1.62 a year ago.
Lincoln National is expected to post earnings of $2.01 per share for the current quarter, representing a year-over-year change of +28.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -9.4%.
Lincoln National has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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American Equity (AEL) Up 23.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for American Equity Investment (AEL - Free Report) . Shares have added about 23.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American Equity due for a pullback? 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.
American Equity Q3 Earnings Top Estimates, Decrease Y/Y
American Equity Investment Life Holding Company reported third-quarter 2022 adjusted net earnings of 99 cents per share, which beat the Zacks Consensus Estimate by 17.8%. The bottom line decreased 32.2% year over year.
The quarterly results reflected higher annuity product charges, net investment income and lower expenses, offset by lower premiums and other considerations.
Operational Update
Operating total revenues were $684.4 million, up 12.5% year over year on the back of higher annuity product charges, net investment income and other revenues.
Premiums and other considerations decreased 82.1% year over year to $2.8 million. Annuity product charges increased 4% year over year to $60.8 million.
Net investment income increased 15.8% on a year-over-year basis to $609.7 million. The upside was due to an increase in the average yield on investments resulting from strong returns from partnerships, the benefit from higher short-term interest rates on a floating rate portfolio, lower cash balances and an increase in allocation to higher yielding privately sourced assets to 18.4% of the investment portfolio.
Total benefits and expenses were $93 million, which decreased 73.1% from the year-ago quarter due to lower insurance policy benefits and change in future policy benefits, interest-sensitive and index product benefits and interest expense on subordinated debentures. The investment spread was 2.73%, up from 2.40% in the year-ago quarter.
Financial Update
Cash and cash equivalents were $1.8 billion as of Sep 30, 2022, down 60% from 2021-end. Total investments were about $51.4 billion, which decreased 14.8% from 2021-end. Notes payable totaled $794.8 million, up 60.2% from 2021-end.
Book value per common share, excluding AOCI, was $54.93, up 34.6% from 2021-end. Total debt/total capitalization was 13.9%, deteriorating 250 basis points from 2021-end. Operating return on equity, excluding average AOCI, was 10.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, American Equity has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. 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 C. 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. Notably, American Equity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
American Equity is part of the Zacks Insurance - Life Insurance industry. Over the past month, Lincoln National (LNC - Free Report) , a stock from the same industry, has gained 8.2%. The company reported its results for the quarter ended September 2022 more than a month ago.
Lincoln National reported revenues of $4.63 billion in the last reported quarter, representing a year-over-year change of -11.1%. EPS of -$10.23 for the same period compares with $1.62 a year ago.
Lincoln National is expected to post earnings of $2.01 per share for the current quarter, representing a year-over-year change of +28.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -9.4%.
Lincoln National has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.