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Lincoln National (LNC) Q2 Earnings: What's in the Cards?

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Lincoln National Corp. (LNC - Free Report) is scheduled to report second-quarter 2017 results on Aug 2, after market close.

Riding on higher revenues, Lincoln National surpassed the Zacks Consensus Estimate by a good 18.5%, in the first quarter. Earnings benefited from higher contribution from its segments – Annuities, Retirement Plan Services and Group Protection.

This insurer has a decent surprise history. Over the trailing four quarters, the company exceeded estimates on three occasions, delivering an average positive surprise of 8.75%. This is depicted in the graph below:

Lincoln National Corporation Price and EPS Surprise

Let’s see how things are shaping up for this announcement.

Q2 Flashback

Lincoln National results will reflect growth through its multichannel distribution model, industry leading shelf space and a broad set of customer solutions.

The company’s life insurance business is expected to see top-line growth from a change in sales mix to fight the low interest rate environment. Its strategic focus is to decrease the portion of sales from products with long-term guarantees and to increase the share of earnings coming from the mortality and morbidity business lines.

The company’s wide and expansive independent brokers, agents and financial advisors’ network may expand the distribution reach of its products and add to the top line.

We also expect to see an increase in total annuity sales driven by product enhancements that have been well received in the marketplace. New product launches and upgrades to existing ones will further aid annuity sales.

Margins will get an extra cushion from disciplined expense management, given the company’s efforts to manage general and administrative expenses in a period of slower revenue growth.

Its disciplined capital management by way of share buyback will aid the bottom line.

In the fourth quarter of 2016, the company announced its digital initiative targeted at improving customer experience. These efforts will result in significant cost savings over time as well as potential revenue enhancements, but will cause the company to incur digitization expense of roughly $10 million a quarter in 2017.

Earnings Whispers

Our proven model does not conclusively show that Lincoln National is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Lincoln National has an Earning ESP of -0.58%. This is because the Most Accurate estimate stands at $1.72 per share, a penny below the Zacks Consensus Estimate. 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. We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

Kellogg Company (K - Free Report) will report second-quarter 2017 earnings results on Aug 3. The company has an Earnings ESP of +2.17% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intercontinental Exchange, Inc. (ICE - Free Report) has an Earnings ESP of +1.33% and a Zacks Rank #2. The company is expected to report second-quarter earnings results on Aug 3.

Financial Engines, Inc. (FNGN - Free Report) has an Earnings ESP of +4.00% and a Zacks Rank #2. The company is expected to report second-quarter earnings results on Aug 8.

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