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Why Is Lincoln National (LNC) Down 7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Lincoln National (LNC - Free Report) . Shares have lost about 7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Lincoln National 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.

Lincoln National Beats on Q1 Earnings, Lags Revenues

Lincoln National Corporation’s first-quarter 2019 earnings of $2.14 per share beat the Zacks Consensus Estimate by 2.9%. Moreover, the bottom line improved about 8.6% year over year, mainly led by increase in revenues and share buyback.

Operating revenues of $4 billion increased 9.9% year over year but missed the Zacks Consensus Estimate by 8.5%.

Total expenses rose 16.5% year over year to $3.7 billion, due to higher benefits and commission and other expenses.

Strong Segment Results

Operating income in the Annuities segment was down 6.4% year over year to $250 million. This was mainly due to decline in lower account from Athene reinsurance transaction, completed in the fourth quarter of 2018.

Total annuity deposits soared 39% from the year-ago quarter to $3.5 billion, driven by growth in fixed annuities sales, partly offset by 5% decline in variable annuity sales.

Operating income in Retirement Plan Services decreased 9.3% year over year to $39 million, primarily due to lower variable investment income and spread income, which more than offset an increase in account values. Total deposits increased 6% year over year to $2.5 billion.

Operating income in Life Insurance segment was up 9% year over year to $157 million, as a result of favorable mortality and lower amortization expense, partially offset by a decrease in alternative investment income.

Operating income in Group Protection increased 90% year over year to $55 million. This increase was driven by the buyout of the Liberty Mutual Group benefits business.

The Other operations segment incurred a loss of $60 million, wider than $42 million suffered in the prior-year quarter.

Financial Update

As of Mar 31, 2019, Lincoln National’s book value per share, excluding accumulated other comprehensive income, climbed 9% year over year to $68.79.

Operating return on equity (ROE), excluding accumulated other comprehensive income and goodwill, was up just 10 bps year over year to 14.5%.

The company’s long term debt declined 1.6% year over year to $4.7 billion.
Average shareholders’ equity (excluding AOCI and goodwill) of $12.2 billion declined 0.5% year over year.


How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Lincoln National has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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


Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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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