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What's in the Cards for MetLife's (MET) Earnings in Q2?

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MetLife, Inc.  (MET - Free Report) is slated to report second-quarter 2021 results on Aug 4, after the market closes.

In the first quarter, earnings of $2.20 per share surpassed the Zacks Consensus Estimate by 48.7% and rose 39% year over year. Results were driven by a rise in revenues, higher variable investment income and strong performances at the U.S. and Asia segments, partly offset by escalating costs.

Q2 Earnings & Revenue Expectations  

The Zacks Consensus Estimate for earnings of $1.61 per share implies a 94% increase from the prior-year quarter’s reported number. Likewise, the consensus estimate for sales of $16.28 billion suggests a 17.58% rise from the year-ago quarter’s reported figure.

What’s in Store for MetLlife?

After suffering a revenue decline and high claims on account of COVID-related deaths and a weak business in the recent quarters, things are now looking up for this multiline insurer.

Revenues in the first quarter of 2021 were up 8% after declining 1% in 2020. Revenue growth now looks strong for the insurer as the improving employment scenario is expected to drive the sales of its group benefits insurance business. A glimpse of the same was seen in the March quarter with Group Benefit insurance sales surging 45% year over year.

Management also commented that the company is on track to deliver a record sales period in 2021.

Its depressed underwriting margins will also get some respite from the COVID-led surge in claims. With the vaccination rollout, claims are expected to decline, which will aid margins.

The company is managing its investment income well. For insurers, low interest rate is a woe as they invest the premium received and generate investment income from the same. In this regard, MetLife is navigating the weak interest environment by its sound investment strategy in private equity. It has investments in domestic leveraged buyout funds, European LBOs and venture capital.

Business Developments During the June Quarter

In April, the company’s quarterly dividend was raised by 4.3%. Since 2011, MetLife has been hiking its quarterly dividends, seeing a CAGR of 10%.

In the same month, MetLife completed the divestiture of Metropolitan Property and Casualty Insurance Company, and certain wholly owned subsidiaries to Farmers Group, Inc., a subsidiary of Zurich Insurance Group. The move is in sync with the company’s intent to streamline its business by focusing on high-growth areas, such as the health and benefits business.

Last month, the company announced that it will be divesting a portion of its Europe business to NN Group for $740 million. The said business contributes modestly to the company’s earnings and therefore does not hold much significance to its core activities. Thus, shedding this unprofitable operation should help consolidate the company’s main activities.

Earnings Surprise History

The company’s earnings beat estimates in three of the last four quarters (missed the mark in one), the average surprise being 18.16%. This is depicted int he chart below:

MetLife, Inc. Price and EPS Surprise

MetLife, Inc. Price and EPS Surprise

MetLife, Inc. price-eps-surprise | MetLife, Inc. Quote

 

Here is what our quantitative model predicts:

Our proven model does not predict an earnings beat for MetLife this time around. The combination of a positive  Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our  Earnings ESP Filter.

Earnings ESP:  MetLife has an Earnings ESP of 0.00%.

Zacks Rank:  MetLife currently has a Zacks Rank #2.

Stocks to Consider

Some insurance stocks with the right combination of elements to beat on earnings this season are:

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

Voya Financial Inc.  (VOYA - Free Report) has an Earnings ESP of +1.13% and is Zacks #3 Ranked, presently.

Assurant Inc. (AIZ - Free Report) has an Earnings ESP of +2.01% and a Zacks Rank #3 at present