A month has gone by 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 catalysts.

Lincoln National Q2 Earnings Beat, Revenues Rise Y/Y

Lincoln National’s earnings of $3.17 per share, beat the Zacks Consensus Estimate by 31.5%. The bottom line improved to more than three-fold year over year.

The company’s results were driven by favorable underwriting results, strong equity market performance and robust investment results, partly offset by elevated expenses.

Adjusted operating revenues of $4.9 billion advanced 16.5% year over year in the quarter under review. The upside can be attributed to revenue growth across the four segments of the company — Annuities, Retirement Plan Services, Life Insurance and Group Protection. The top line beat the consensus mark by 1%.

Total expenses increased 10.9% year over year to $4.1 billion primarily due to higher costs related to benefits, commissions and other expenses and, strategic digitization expense.

Segmental Performance

The Annuities segment reported operating income of $323 million, which surged 36% year over year attributable to increased account values and favorable returns stemming from the company’s alternative investment portfolio. Operating revenues improved 20.4% year over year to $1.2 billion.

Total annuity deposits rose 28% year over year to $3.2 in the quarter under review on account of 37% growth in variable annuity sales.

Operating income in the Retirement Plan Services segment amounted to $62 million, which more than doubled year over year. The improvement came on the back of increased account values, positive net flows and favorable returns resulting from the company’s alternative investment portfolio. Operating revenues advanced 18.1% year over year to $333 million. Total deposits grew 21% year over year to $2.8 billion in the second quarter, courtesy of double-digit growth across first-year sales and recurring deposits.

The Life Insurance segment delivered operating income of $255 million, which compared favorably with the prior-year quarter’s loss from operations of $37 million. The upside can be attributed to reduced mortality impact and favorable returns from the company’s alternative investment portfolio. Operating revenues of $2 billion climbed 23.8% year over year. Total life insurance sales, however, fell 20.8% year over year to $126 million in the quarter under review.

Group Protection segment’s operating income totaled $46 million, which increased 18% year over year. Results were buoyed by reduced mortality impact resulting from the pandemic and rising premiums. Operating revenues were up 4% year over year to $1.2 billion. Total sales of $79 million at the segment slumped 24.8% year over year.

Financial Update (as of Jun 30, 2021)

The company exited the second quarter with cash and invested cash of $2.4 billion, which plunged 43.1% year over year. Total assets of $380.1 billion increased 11.9% year over year.

Long-term debt totaled $6.3 billion, which decreased 6% from the prior-year quarter’s figure.

Shareholders’ equity of $21.7 billion improved 4.9% year over year.
Book value per share, excluding accumulated other comprehensive income (AOCI), rose 9% year over year to $75.45.

Adjusted operating return on equity (ROE) excluding AOCI improved 1,180 basis points year over year to 17.3%.

Share Repurchase Update

The company bought back shares worth $150 million in the second quarter.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 5.14% due to these changes.

VGM Scores

Currently, Lincoln National has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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. It comes with little surprise Lincoln National has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.