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Brighthouse Financial (BHF) Down 6.3% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Brighthouse Financial (BHF - Free Report) . Shares have lost about 6.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Brighthouse Financial due for a breakout? 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 drivers.

Brighthouse Financial (BHF - Free Report) Q2 Earnings Miss, Revenues Top

Brighthouse Financial second-quarter 2018 adjusted net income of $1.27 per share missed the Zacks Consensus Estimate of $2.03 by 37.4%. Increase in corporate expenses and unfavorable results in the Run-off segment resulted in the underperformance.

Net loss came in at $2.01 per share in the reported quarter.

Behind the Headlines

Total revenues of $2.1 billion surpassed the Zacks Consensus Estimate by 1.1%. However, the top line dipped 0.7% year over year.

Premiums of $223 million increased 2.3% year over year. Annuity sales improved 42% year over year on increase in sales of Shield and fixed indexed annuities.Net investment income was $806 million in the reported quarter, up 5.2% year over year. The improvement was fueled by growth in assets and the ongoing repositioning of the investment portfolio, partially offset by lower alternative investment income.  Investment income yield was 4.4%.

Corporate expenses of $288 million pretax increased from $230 million pretax in the first quarter of 2018. Brighthouse Financial expects corporate expenses in the first year post-separation between $1 and $1.1 billion.

Total expenses rose 18.5% year over year on higher interest credited to policyholder account balances, Policyholder benefits plus claims and other expenses.

Quarterly Segment Update

Annuities reported adjusted operating income of $221 million, down 2.2% year over year on escalated expenses.

Life reported adjusted operating income of $37 million, skyrocketing 208% year over year. This improvement stemmed from better net investment income owing to portfolio realignment completed in the first quarter of 2018, partially offset by higher DAC amortization and higher expenses.

Adjusted operating loss in Run-off was $6 million on higher claims and reserve development plus lower net investment income against income of $52 million in the year-ago quarter.

Adjusted operating loss at Corporate & Other was $99 million due to lower net investment income and higher expenses versus $34 million income in the prior-year quarter.

Financial Update

Cash and cash equivalents were $2.1 billion, down 51.9% year over year. Shareholders’ equity of $13.4 billion at the quarter-end decreased 18.2% year over year.

Book value per share was $105.37 as of Jun 30, 2018.

Guidance

Brighthouse Financial continues to estimate adjusted earnings per share between $8.50 and $9.00 in 2018. Adjusted return on equity is expected about 8%.

Share Buyback Program

Brighthouse Financial’s board of directors a $200-million worth repurchase of shares.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Brighthouse Financial has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Brighthouse Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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