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Manulife (MFC) Up 0.5% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Manulife Financial (MFC). Shares have added about 0.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Manulife 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 drivers.

Manulife Q1 Earnings Top Estimates, APE Sales Rise Y/Y

Manulife delivered first-quarter 2024 core earnings of 70 cents per share, which beat the Zacks Consensus Estimate by 6.1%. The bottom line increased 20.7% year over year. Core earnings of $1.3 billion (C$1.8 billion) improved 16% year over year. This reflects strong business growth across its insurance businesses and higher fee income in Global WAM, driven by favorable market impact and positive net flows.

New business value (NBV) in the reported quarter was $488 million (C$669 million), up 34% year over year.

Annualized premium equivalent (APE) sales increased 21% year over year to $1.4 billion (C$1.9 billion).

New business contractual service margin (CSM) increased 52% year over year to $480 (C$658 million)

The Global Wealth and Asset Management business generated net inflows of $4.9 billion (C$6.7 billion), up 55% year over year.

Core return on equity, measuring the company’s profitability, expanded 190 basis points year over year to 16.7%.

The Life Insurance Capital Adequacy Test ratio was 138% as of Mar 31, 2024.

Segmental Performance

Global Wealth and Asset Management division’s core earnings were $260 million (C$357 million), up 25% year over year. Retirement net inflows of $2.3 billion (C$3.2 billion) more than doubled year over year, reflecting higher new retirement plan sales across the company’s three geographies. Retail net inflows of $1.2 billion (C$1.7 billion) more than doubled year over year, driven by increased demand for investment products amid equity market recovery and improved investor sentiment. However, Institutional Asset Management net inflows of $1.3 billion (C$1.8 billion) decreased 28% as higher fixed income mandates sales and lower money market redemptions were offset by higher redemptions in fixed income and equity mandates.

Asia division’s core earnings totaled $488 million, up 39% year over year.

Business mix and the impact of updates to actuarial methods and assumptions in the prior year further contributed to 68% growth in new business CSM.

APE sales increased 13%, driven by growth in Asia Other and Japan, partially offset by lower sales in Hong Kong. In Asia, NBV rose 28% year over year.

Manulife Financial’s Canada division’s core earnings of $265 million (C$364 million) rose 3% year over year. In Canada, NBV increased 71% year over year. New business CSM increased 52% year over year.

APE sales jumped 54% year over year, driven by higher sales volumes in all business units, led by large-case Group Insurance sales year over year.

The U.S. division reported core earnings of $335 million, up 18% year over year. New business CSM increased 3% year over year.

NBV increased 9% year over year. APE sales jumped 14%, reflecting an increase in demand from affluent customers for accumulation insurance products.

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How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Manulife has an average Growth Score of C, a grade with the same score on the momentum front. 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 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 downward for the stock, and the magnitude of these revisions has been net zero. Notably, Manulife has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Manulife is part of the Zacks Insurance - Life Insurance industry. Over the past month, Lincoln National (LNC), a stock from the same industry, has gained 10.7%. The company reported its results for the quarter ended March 2024 more than a month ago.

Lincoln National reported revenues of $4.58 billion in the last reported quarter, representing a year-over-year change of -1.6%. EPS of $1.37 for the same period compares with $1.52 a year ago.

For the current quarter, Lincoln National is expected to post earnings of $1.80 per share, indicating a change of -10.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.6% over the last 30 days.

Lincoln National has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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