It has been about a month since the last earnings report for Lincoln National (LNC Quick QuoteLNC - Free Report) . Shares have added about 3.5% 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 drivers.

Lincoln National Q1 Earnings Beat, Revenues Up Y/Y

Lincoln National's first-quarter 2021 adjusted earnings of $1.82 per share, which outpaced the Zacks Consensus Estimate by 23%. However, the bottom line declined 18.8% year over year.

The company’s results indicate growing operating revenues and strong expense management across its businesses, partly offset by the adverse impact of the COVID-19 pandemic.

Adjusted operating revenues improved 5.6% year over year to $4.8 billion in the quarter, courtesy of revenue growth in the company’s four business segments. – Annuities, Retirement Plan Services, Life Insurance and Group Protection. However, the top line missed the Zacks Consensus Estimate by 1.7%.

In the quarter, total expenses of $4.3 billion dipped 2.7% year over year attributable to reduced interest credited, commissions and other expenses, and strategic digitization expense.

Segmental Performance

Operating income in the Annuities segment amounted to $290 million, which rose 11% year over year driven by increased account values and favorable returns stemming from the company’s alternative investment portfolio. Operating revenues of $1.2 billion improved 6.6% year over year.

Total annuity sales dropped 24% year over year to $2.8 billion in the quarter primarily due to 91.9% decline in fixed annuity sales arising from product actions undertaken as a result of lower interest rates. Nevertheless, a 3% rise in variable annuity sales provided a boost to the segment’s results.  

Retirement Plan Services segment’s operating income of $57 million surged 43% year over year in the quarter, courtesy of rise in account values and strong expense management. Operating revenues of $327 million advanced 10.1% year over year. Total deposits slid 5% year over year to $2.6 billion primarily due to drop in first-year sales, partly offset by increasing recurring deposits.

Life Insurance segment’s operating income totaled $107 million, which slumped 37.4% year over year due to pandemic-linked mortality. Operating revenues $1.7 billion grew 6.5% year over year. Total life insurance sales fell 32.5% year over year to $114 million on account of 39.9% drop in individual life insurance sales. Nevertheless, a 7.7% rise in executive benefits sales partly benefited total sales.

The company’s Group Protection segment reported an operating loss of $26 million against the prior-year quarter’s operating income of $40 million. The downside was primarily due to the pandemic-related mortality and morbidity experience. Operating revenues improved 2.5% year over year to $1.3 billion. However, total sales in the segment declined 27.5% year over year to $74 million.

Financial Update (as of Mar 31, 2021)

The company exited the first quarter with cash and invested cash of $1.4 billion, which reduced to nearly five-fold year over year. Long-term debt amounted to $6.3 billion, down 6% over year.

During the first quarter, total assets improved 15.1% year over year to $366.8 billion. Shareholders’ equity climbed 18.2% year over year to $19.6 billion.

As of Mar 31, 2021, the company’s book value per share excluding accumulated other comprehensive income (AOCI) grew 3% year over year to $72.36. Adjusted operating return on equity (ROE) excluding AOCI came in at 10.2%, down 330 basis points year over year.
Share Repurchase Update

In the reported quarter, the company bought back shares worth $105 million.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 7.93% due to these changes.

VGM Scores

Currently, Lincoln National has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Lincoln National has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.