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Lincoln National (LNC) Up 3.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Lincoln National (LNC - Free Report) . Shares have added about 3.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Lincoln National's  Q3 Earnings Surpass, Increase Y/Y

Lincoln National Corporation’ third-quarter 2018 earnings of $2.34 per share beat the Zacks Consensus Estimate by 7.8%. Moreover, the bottom line improved about 15.3% year over year, mainly led by double-digit earnings growth across all business lines as well as strategic investments such as Liberty acquisition. Earnings were also supported by the company’s operational efficiency and its disciplined capital management.

Operating revenues of $4.3 billion increased 21% year over year but missed the Zacks Consensus Estimate by 0.6%.

Strong Segment Results

Operating income in the Annuities segment rose 9% year over year to $302 million. This was mainly driven by higher fee income generated from account value growth as well as lower reported tax rate.

Total annuity deposits soared 61% from the year-ago quarter to $3.1 billion, driven by growth in variable and fixed annuities owing to product and distribution expansion.

Operating income in Retirement Plan Services increased 14% year over year to $40 million, banking on growth in fee income, lower costs and a slashed tax rate. Total deposits surged 74% from the prior-year quarter’s value to $3,3 billion owing to better first-year sales, growth in targets markets and recurring deposits.

Operating income in Life Insurance segment was up 45% year over year to $176 million as a result of favorable mortality, increasing revenues and a lower reported tax rate.

Operating revenues from this segment increased 9% year over year to $1.8 billion.

Operating income in Group Protection plunged 53.6% from the year-ago quarter’s figure to $63 million.  This downside was driven by the buyout of the Liberty Mutual Group benefits business. Operating revenues skyrocketed 73.2% year over year to $937 million.

The Other operations segment incurred a loss of $71 million, wider than $20 million suffered in the prior-year quarter, mainly due to tax items, funding acquisitions and a strategic increase in digitalization costs.

Financial Update

As of Sep 30, 2018, Lincoln National’s book value per share excluding accumulated other comprehensive income, climbed 8% year over year to $66.27.

Operating return on equity (ROE) excluding accumulated other comprehensive income and goodwill, improved 10 bps from the year-ago quarter’s number to 16.5%.

The company ended the quarter with long-term debt of $5.8 billion, up 8.4% year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Lincoln National has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Lincoln National has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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