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Lincoln National (LNC) Up 2% 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 2% 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 Q4 Earnings Beat, Up Y/Y

Lincoln National Corporation’s fourth-quarter 2018 earnings of $2.15 per share beat the Zacks Consensus Estimate by 0.94%. Moreover, the bottom-line improved about 8.6% year over year, mainly led by increase in revenues and a very low rise in expense.

Operating revenues of $4.5 billion increased 20% year over year but missed the Zacks Consensus Estimate by 10.6%.

Strong Segment Results

Operating income in the Annuities segment was down 2.6% year over year to $258 million. This was mainly due to lower account value growth, partly offset by a lower reported tax rate.

Total annuity deposits soared 35% from the year-ago quarter to $3.8 billion, driven by growth in variable and fixed annuities owing to product and distribution expansion

Operating income in Retirement Plan Services increased 10% year over year to $45 million, led by lower expenses and a slashed tax rate. Total deposits declined 11% year over year to $2.2 billion.

Operating income in Life Insurance segment was up 15% year over year to $175 million as a result of stronger variable investment income and a lower reported tax rate.

Operating income in Group Protection increased 150% year over year to $50 million. This increase was driven by the buyout of the Liberty Mutual Group benefits business and a lower tax rate.

The Other operations segment incurred a loss of $53 million, wider than $38 million suffered in the prior-year quarter, quarter. The decrease in earnings is primarily attributable to lower tax benefits on pre-tax losses as a result of tax reform.

Financial Update

As of Dec 31, 2018, Lincoln National’s book value per share, excluding accumulated other comprehensive income, climbed 4.8% year over year to $67.73.

Operating return on equity (ROE) excluding accumulated other comprehensive income and goodwill, improved 70 bps from the year-ago quarter’s number to 13.5%.

The company ended the quarter with long-term debt of $5.9 billion, up 23.4% year over year.

Total shareholders’ equity of $14.3 billion declined 17.2% 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 a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, 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 has been net zero. Notably, Lincoln National has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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