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What's In Store for Lincoln National (LNC) in Q2 Earnings?

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Lincoln National Corporation (LNC - Free Report) is slated to report second-quarter 2021 results on Aug 4, after the market closes.

Q2 Estimates

The Zacks Consensus Estimate for the company’s second-quarter earnings per share is pegged at $2.41, indicating a rise of 148.45% from the prior-year quarter’s reported figure. The consensus mark for revenues stands at $4.85 billion, which suggests a 15.32% increase from the year-ago quarter’s reported number.

Factors to Note

Lincoln National is set to grow amid favorable conditions. The COVID-19 increased the importance of getting a life insurance coverage and the improving employment scenario bodes well for its Group insurance business. Now the pandemic headwinds continue to decline and vaccines are more widely rolled out. This combination of underlying growth and improving mortality results positions the company well for its Life Insurance business as well as Group business.  

In Lincoln National’s Annuity business, variable annuity sales without guaranteed living benefits are likely to have grown but the same might have been partly offset by a decline in variable annuity sales with living benefits.
The company’s Retirement business is also poised to benefit from the tailwinds of an improved economic backdrop and an expanding set of retirement solutions products.

Lincoln National is also adding to its distribution force by attracting insurance advisors and this will also be beneficial to its sales.

The company did an impressive job in protecting investment returns in the face of low interest rate environment. Its portfolio is performing quite well with high credit quality, which has been improving in recent years. 96% of its fixed income assets is investment-grade with 59% rated A or higher. Investment income has been rising from the past many years and this trend should continue given its investment in alternative investments which have performed strongly in recent quarters.

Apart from working on growing its top line via product innovation, the company is focusing on slashing its costs to preserve margins. It continues to report declining expense ratios in most of its businesses. It is investing in client-facing digital tools, which will enrich user experience and enhance the company’s efficiency. Expense-saving initiatives will continue to aid earnings growth.

We cannot overlook the company’s robust balance sheet and strong free cash flow generation either. This combination helps effective capital deployment. In fact, on the back of its solid capital position, recovering capital market and a positive outlook for its business, the company expects share repurchase in the second quarter to be approximately $150 million, in line with the pre-pandemic levels.

Earnings Surprise History

The company has an unimpressive earnings surprise history. Its bottom line missed estimates in three of the trailing four quarters and beat the mark once, the average negative surprise being 39.16%. This is depicted in the chart below:

What Our Quantitative Model Predicts

The proven Zacks model does not conclusively predict an earnings beat for Lincoln National this time around. The combination of a positive Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Lincoln National has an Earnings ESP of -1.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

Zacks Rank: Lincoln National carries a Zacks Rank #2, currently.

Stocks to Consider

Some stocks worth considering from the insurance industry with the perfect mix of elements to surpass estimates in the upcoming releases are as follows:

Assurant, Inc. (AIZ - Free Report) currently has a Zacks Rank #3 and an Earnings ESP of +0.50%.

Radian Group Inc. (RDN - Free Report) is currently Zacks #3 Ranked and has an Earnings ESP of +1.66%.

American International Group, Inc. (AIG - Free Report) has an Earnings ESP of +7.56% and is presently a #3 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.