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Lincoln National (LNC) Up 13.5% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Lincoln National (LNC - Free Report) . Shares have added about 13.5% in that time frame, outperforming 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 Q4 Earnings Miss, Down YoY

Lincoln National Corp. fourth-quarter 2020 earnings of $1.78 per share, missed the Zacks Consensus Estimate by 10.1% and was down 26.1% year over year.

Results were impacted by increase in benefit expense, which was more than revenue growth.

Adjusted operating revenues of $4.66 billion, however, increased 3.1% year over year and surpassed the Zacks Consensus Estimate by 0.9%, driven by highest contribution from its Life insurance segment.

Total expenses was up 4.7% year over year to $4.1 billion, primarily due to higher benefits  and strategic digitization expense.

Segmental Performance

Operating income in the Annuities segment was up 7.4% year over year to $289 million. Revenues of $1.16 billion inched up 0.9% year over year. Total annuity sales plunged 35.7% to $2.5 billion from the year-ago quarter, driven by 93%  and 11%, respective declines in fixed and variable annuity sales.

Operating income in Retirement Plan Services rose 4.3% year over year to $49 million. Revenues of $323 million climbed 4.2% year over year. Total deposits declined 4% year over year to $2.6 billion owing to decline in first-year sales partly offset by slight growth in recurring deposits.

Life Insurance segment income of $144 million, declined 19.6% year over year. Moreover, operating revenues in this segment increased 4.9% year over year to $1.9 billion. Total life insurance sales declined 74% year over year to $115 million led by 70% and 92% respective decline in individual life and executive benefits.

The company’s Group Protection reported an operating loss of $42 million which was in contrast with operating income $54 million in the year ago quarter. Operating revenues were up 2.2% year over year to $1.19 billion, courtesy of 51.5% increase in sales.

Share Repurchase Update

The company resumed share repurchases with $50 million completed in the quarter.

Financial Update (as of Dec 31, 2020)

Lincoln National’s book value per share excluding accumulated other comprehensive income inched up 0.4% year over year to $71.59. Adjusted operating return on equity (ROE) excluding accumulated other comprehensive income and goodwill stands at 10.1% down  380 basis points year over year.

The company ended the quarter with long-term debt of $6.7 billion, up 4.9% yearver year. The company had assets worth $365.9 billion, up 9.3% from the year-ago quarter’s number. Shareholders’ equity increased 15.3% year over year to $22.7 billion.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -20.81% due to these changes.

VGM Scores

Currently, Lincoln National has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, 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 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. It's no surprise Lincoln National has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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