Lincoln National Corporation ( LNC Quick Quote LNC - Free Report) shares gained 8.7% in the past three months against the 0.2% decline of the industry. The Finance sector has gained 1.7%, while the Zacks S&P 500 composite has risen 3.9%. With a market capitalization of $4.3 billion,the average volume of shares traded in the last three months was about 2.4 million. Image Source: Zacks Investment Research
Enhancement of existing products, resurging Group Protection business and rising investment income are driving the stock.
Lincoln National currently has a
VGM Score of A. The Style Score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum. Favorable Factors
Let’s delve deeper to unearth the factors working in favor of this Zacks Rank #3 (Hold) stock.
The Zacks Consensus Estimate for 2023 earnings per share is pegged at $7.15, indicating an increase of 237%. LNC beat earnings estimates in two of the last four quarters, missing on two other occasions.
The Group Protection segment continued to see improved growth and profitability in the first half of 2023. This segment contributed one-third to the operating earnings in the second quarter, and management expects this to continue in the future. We expect total revenues to rise 3.3% in 2023. LNC expects to sustain a margin of 7% over the long term, thanks to strategic initiatives taken by the company to grow this business. Improved sales of supplemental health products should continue to drive growth in this segment.
The company’s operating cash flow is expected to improve in the future as it continues to execute its strategy of generating solid cash flow by investing in profitable businesses. Although, it took a hit in the first half of 2023, as the company realizes savings from its Spark Initiative, cash flow is likely to increase. The company also expects to generate improved cash flow following the close of the Fortitude Re block reinsurance transaction. Following this transaction, free cash flow is anticipated to increase $100 million per year.
Lincoln National expects sales to grow in the annuity segment for 2023, driven by product enhancements and tie-ups. As LNC enhances its value propositions, certain measures taken with the distribution partners are expected to further drive sales in the second half of 2023.
The company reported an increase of 7.9% in net investment income for the second quarter. A high-interest rate environment should continue to be a tailwind for this metric.
The company’s sturdy capital position supports effective capital deployment. LNC’s
dividend yield is currently 7.1%, much higher than the industry’s average of 3.9%. It bought back shares worth $76 million in the first half of 2023. At the second-quarter end, it had a remaining security repurchase authorization of $714 million. Risks
Despite the upside potential, there are some factors that investors should keep an eye out for.
The company’s troubled Life Insurance segment is weighing on the company’s results. The pre-tax income declined 52.7% in the second quarter of 2023. The company expects this segment to remain a headwind as it would take time to benefit from a shift in the product mix. Nevertheless, we believe that a systematic and strategic plan of action will drive long-term growth.
Stocks to Consider
Some better-ranked stocks in the broader finance space include
Arch Capital Group Ltd. ( ACGL Quick Quote ACGL - Free Report) , Aflac Incorporated ( AFL Quick Quote AFL - Free Report) and Chubb Limited ( CB Quick Quote CB - Free Report) . Arch Capital currently sports a Zacks Rank #1 (Strong Buy), while Aflac and Chubb carry a Zacks Rank #2 (Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here
Arch Capital’s earnings surpassed estimates in each of the last four quarters, the average surprise being 26.8%. The Zacks Consensus Estimate for ACGL’s 2023 earnings and revenues indicates a rise of 38.2% and 30.6%, respectively, from the year-ago actuals. The consensus mark for ACGL’s 2023 earnings has moved 2.3% north in the past 30 days.
The bottom line of Aflac beat estimates in each of the trailing four quarters, the average beat being 7.8%. The Zacks Consensus Estimate for AFL’s 2023 earnings indicates a rise of 12.2% from the year-ago tally. The consensus mark for AFL’s 2023 earnings has moved 1.4% north in the past 30 days.
Chubb’s earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 3.4%. The Zacks Consensus Estimate for CB’s 2023 earnings indicates a rise of 19.3%, while the same for revenues suggests an improvement of 8.8% from the respective year-ago actuals. The consensus mark for CB’s 2023 earnings has moved 0.8% north in the past 30 days.
Shares of Arch Capital, Aflac and Chubb have gained 64.5%, 20.4% and 3.5%, respectively, in a year.