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Why Is Lincoln National (LNC) Up 0.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Lincoln National (LNC - Free Report) . Shares have added about 0.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Lincoln National 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 catalysts.

Lincoln National Q2 Earnings Miss Estimates, Increase Y/Y

Lincoln National Corporation’s second-quarter 2018 earnings of $2.02 per share missed the Zacks Consensus Estimate by 3.8%. However, the bottom line improved about 9.2% year over year, mainly led by solid performances across all segments, annuity sales and the recent acquisition of Liberty.

Operating revenues of $4.02 billion increased 12.4% year over year and also surpassed the Zacks Consensus Estimate by 0.2%.

Insurance premium surged 45.4% year over year to $1165 million while fee income grew 5.5% to $1.47 billion.

Total expenses rose 17.3% to $3.57 billion year over year, mainly driven by higher benefits plus commission and other expenses.

Strong Segment Results

Operating income in the Annuities segment gained 10% year over year to $275 million. This was mainly driven by higher fee income generated from account value growth as well as lower expenditure.

Total annuity deposits soared 50% from the year-ago quarter to $3 billion, driven by growth in variable and fixed annuities.

Operating income in Retirement Plan Services increased 16% year over year to $43 million, banking on growth in fee income, recurring deposits and a lower tax rate. Total deposits piled up 12% from the prior-year quarter’s value to $2.2 billion owing to better first-year sales and recurring deposits.
Operating income in Life Insurance segment was up 13% year over year to $150 million as a result of lower tax rate and lower expenses. However, the same was partially offset by lower variable investment income.

Operating revenues inched up 1.5% year over year to $1.68 billion.
Operating income in Group Protection jumped 29% from the year-ago quarter’s figure to $45 million.  This upside was driven by the buyout of the Liberty Mutual Group benefits business. Operating revenues skyrocketed 73.2% year over year to $937 million.

Other Operations

The company incurred a loss of $59 million, wider than $37 million incurred in the prior-year quarter.

Financial Update

As of Jun 30, 2018, Lincoln National’s book value per share, excluding accumulated other comprehensive income, climbed 8% year over year to $64.32.

Operating return on equity (ROE) excluding accumulated other comprehensive income and goodwill, improved 40 bps from the year-ago quarter’s number to 13.1%.

The company ended the quarter with long-term debt of $5.82 billion, up 18.8% year over year

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Lincoln National has a subpar Growth Score of D, 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 20% 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.

The company's stock is suitable solely for value based on our style scores.

Outlook

Lincoln National has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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