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Lincoln National (LNC) Down 0.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Lincoln National (LNC - Free Report) . Shares have lost about 0.7% in that time frame, underperforming 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 Q2 Earnings Miss Estimates, Fall Y/Y

Lincoln National Corp. second-quarter 2020 earnings of 97 cents per share missed the Zacks Consensus Estimate by 36.2%. Further, the bottom line declined 59% year over year.

Second-quarter results were impacted by an elevated claims experience from COVID-19 and the negative returns within the company’s alternative investment portfolio.

Adjusted operating revenues of $4.2 billion decreased 5.8% year over year.
This downside was due to weak performance at its Annuities, Retirement Plan Services and Life Insurance segments. Also, the top line missed the Zacks Consensus Estimate by 5.5%.

Total expenses fell 5.4% year over year to $3.7 billion, primarily on lower commissions and other expenses.

Net investment income declined 13.5% year over year to $1.17 billion.

Segmental Performance

Operating income in the Annuities segment was down 10.9% year over year to $237 million. Revenues of $1.04 billion dropped 10.3% year over year due to weak sales of fixed annuities.

Total annuity deposits plunged 31.2% from the year-ago quarter to $2.5 billion.

Operating income in Retirement Plan Services decreased 28.6% year over year to $30 million Revenues of $282 million dipped 5.7% year over year.

Total deposits improved 11.3% year over year to $2.3 billion owing to growth in recurring deposits and strong first-year sales.

Life Insurance segment reported an operating loss of $37 million against an operating income of $168 million in the year-ago quarter. However, operating revenues in this segment decreased 9% year over year to $1.6 billion.

Operating income in Group Protection slumped 42.6% year over year to $39 million.  Operating revenues were up 3.8% year over year to $1.2 billion, courtesy of higher sales in Life and Disability business..

Financial Update (as of Jun 30, 2020)

Lincoln National’s book value per share excluding accumulated other comprehensive income slid 1.3% year over year to $69.38.

Adjusted operating return on equity (ROE) excluding accumulated other comprehensive income and goodwill deteriorated 810 bps from the year-ago quarter’s number to 5.5%.

The company ended the quarter with long-term debt of $6.7 billion, up 23.4% year over year.

As of Jun 30, 2020, the company had assets worth $339.7 billion, up 5.4% from the year-ago quarter’s number. Shareholders’ equity increased 12.3% year over year to $20.7 billion.
 

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 poor Growth Score of F, however its Momentum Score is doing a bit better 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

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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