A month has gone by since the last earnings report for Lincoln National (LNC Quick QuoteLNC - Free Report) . Shares have added about 2.9% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Lincoln Q3 Earnings Miss on Lower Annuities Profits

Lincoln National reported third-quarter 2023 adjusted earnings of 23 cents per share, which missed the Zacks Consensus Estimate by 86.9%. However, the bottom line significantly improved from a loss of $11.49 a year ago.

Adjusted operating revenues grew 5.7% year over year to $4.7 billion. The top line missed the consensus mark by 1.6%.

The weaker-than-expected quarterly results were due to higher commissions, benefits and other expenses. Lower profits from Annuities and Retirement Plan Services affected the bottom line, partially offset by improved Life Insurance and Group Protection businesses.

Costs and Expenses

Total expenses plunged 53.4% year over year to $3.2 billion in the quarter under review and remained below our estimate of $3.6 billion due to the incidence of a significant MRB gain. Benefits of $2.2 billion accounted for 67.9% of the quarter’s overall costs, increased marginally and were above our estimate of $2.1 billion.Commissions and other expenses rose 4.3% year over year to $1.3 billion and were above our model estimate.

Inside LNC’s Segments

The Annuities segment recorded an operating income of $248 million, which decreased 9.8% year over year and missed the estimate by 9%. The metric suffered from increased expenses. Operating revenues of $1.2 billion increased 7.5% year over year and comfortably beat our estimate of $1.1 billion. Total annuity deposits fell 15.3% year over year to $2.7 billion in the quarter under review.

Operating income in the Retirement Plan Services segment came in at $43 million, which fell 9% year over year and missed our estimate of $47.1 million due to an elevated expense level, partly offset by increased fee and spread income. Operating revenues of $327 million grew 3.5% year over year in the third quarter and outpaced our estimate of $318 million. Total deposits tumbled 12.6% year over year to $2.7 billion.

The Life Insurance segment reported an operating income of $173 million in the quarter under review, improving 92% year over year, as year-ago income included massive unfavorable notable items. Operating revenues of $1.7 billion inched up 6.2% year over year and comfortably beat our estimate. Total Life Insurance sales dropped 16% year over year to $144 million. Total deposits of $1.3 billion fell 9.5% year over year in the third quarter.

The Group Protection segment recorded an operating income of $68 million in the quarter under review, which rose from $12 million a year ago but remained lower than our estimate. This significant jump can be attributed to better disability underwriting results. Operating revenues increased 4.1% year over year to $1.4 billion, higher than our estimate of $1.3 billion. Insurance premiums of $1.3 billion rose 4.3% year over year. Sales amounted to $71 million in the segment, which decreased 19% year over year.

Other Operations incurred an operating loss of $113 million in the third quarter, marginally wider than the prior quarter and higher than our estimate of $98.4 million.

Financial Update (as of Sep 30, 2023)

Lincoln National exited the third quarter with cash and invested cash of $2.5 million, which fell from $3.3 billion at 2022-end. Total assets of $338.4 billion increased from $334.2 billion at 2022-end.

Long-term debt amounted to $5.9 billion, which declined from almost $6 billion at 2022-end. 

Shareholders’ equity of $3.2 billion decreased from $5.1 billion at 2022-end.

Book value per share, excluding accumulated other comprehensive income, came in at $63.03, which rose 9.7% year over year. Adjusted income from operations ROE came in at 1.4%, which improved from negative 60.7% a year ago.

Capital Deployment Update

Lincoln National returned $76 million in the form of common dividends to its shareholders in the third quarter. It did not make any share repurchases in the quarter under review.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -7.32% due to these changes.

VGM Scores

At this time, Lincoln National has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lincoln National has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Lincoln National is part of the Zacks Insurance - Life Insurance industry. Over the past month, Voya Financial (VOYA Quick QuoteVOYA - Free Report) , a stock from the same industry, has gained 4.6%. The company reported its results for the quarter ended September 2023 more than a month ago.

Voya reported revenues of $281 million in the last reported quarter, representing a year-over-year change of -21.1%. EPS of $2.07 for the same period compares with $2.30 a year ago.

Voya is expected to post earnings of $2.10 per share for the current quarter, representing a year-over-year change of -3.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.9%.

Voya has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.