Yahoo Finance Why Is Lincoln National (LNC) Down 20.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Lincoln National (LNC). Shares have lost about 20.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is 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 Q4 Earnings Miss, Revenues Decrease
Lincoln National Corporation reported fourth-quarter 2022 adjusted profit of 97 cents per share, missing the Zacks Consensus Estimate of $1.89. The bottom line also declined from earnings of $1.56 per share in the prior-year quarter.
Adjusted operating revenues amounted to $4,676 million, which dropped 2% year over year. Yet, the top line beat the consensus mark by 3.4%.
In the fourth quarter, profits suffered a blow from an unfavorable item related to legal expenses. Quarterly results were also affected by unfavorable equity markets, hampering Annuities and Retirement Plan Services results. However, reduced pandemic-linked claims of the Group Protection Segment and lower overall costs and expenses partially offset the downside.
Costs and Expenses
Lincoln National’s expenses of $4,231 million decreased 3.1% year over year in the quarter under review, primarily due to lower costs related to benefits. Benefits account for 46.9% of the quarter’s total expenses.
Segmental Update
The Annuities segment’s operating income plunged 28% year over year to $238 million in the fourth quarter due to unfavorable equity markets lowering account values. Operating revenues fell 7.2% year over year to $1,190 million but beat the consensus mark by 1.1%. Total annuity deposits of $3,210 million grew 6.6% year over year, thanks to sales growth in fixed and indexed variable annuities, which offset the lower traditional variable annuities.
Operating income in the Retirement Plan Services segment amounted to $49 million, which tumbled 14% year over year, mainly due to lower equity markets partially offset by higher spread income. The figure came lower than the consensus mark of $55 million.
Operating revenues of $324 million decreased 3.3% year over yearbut beat the consensus mark of $318 million. Total deposits deteriorated 7.4% year over year to $2,777 million in the quarter under review due to a decrease in first-year sales and recurring deposits.
The Life Insurance segment recorded an operating profit of $46 million in the fourth quarter compared to the prior-year quarter’s operating income of $80 million. Lower returns from the insurer’s alternative investment portfolio were one of the factors hampering the performance of the segment.
Operating revenues plunged 4.1% year over year to $1.769 millionbut beat the Zacks Consensus Estimate by 8.9%. Total Life Insurance sales of $186 million decreased 27% year over year on the back of lower universal life insurance, term life insurance, executive benefits and money guard-linked benefit products. Total deposits of $1,575 million decreased 15.9% year over year.
The Group Protection segment reported an operating income of $47 million in the fourth quarter against the prior-year quarter’s loss of $115 million. This significant growth came from reduced pandemic-linked claims and improved disability results.
Operating revenues of $1,344 million improved 7.3% year over year and beat the consensus mark by 2.8%. Insurance premiums advanced 8.6% year over year to $1,213 million. Total sales in the segment plunged 7.5% year over year to $356 million.
Other Operations reported a loss of $210 million, which widened year over year from $68 million in fourth-quarter 2021.
Financial Update (as of Dec 31, 2022)
Lincoln National exited December 2022 with cash and invested cash of $3,343 million, which increased from $2,612 million at 2021-end. Total assets of $335.4 billion fell from $387.3 billion at 2021-end.
Long-term debt amounted to $5,955 million, which decreased from $6,561 million as of December 2021. It had short-term debt of $500 million at the fourth-quarter end.As of Feb 8, 2022, its senior debt received ‘BBB+’ ratings from Standard & Poor’s and Fitch.
Shareholders’ equity of $4,101 million plunged from $20,272 million at 2021-end.
Book value per share, excluding accumulated other comprehensive income (AOCI), decreased 18.3% year over year to $63.7.
Adjusted operating return on equity, excluding AOCI, came in at a positive figure of 6% during the fourth quarter.
Full-Year Highlights
Adjusted operating revenue was $18,665 million, down 5% from 2021. Adjusted operating loss per share was $5.22 per share against the year-ago income of $8.20.
Capital Deployment Update
Lincoln National returned $76 million to its shareholders in the fourth quarter through common dividend payments.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -7.28% due to these changes.
VGM Scores
Currently, Lincoln National has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, 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 C. 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 indicates a downward shift. It's no surprise Lincoln National has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Lincoln National Corporation (LNC) : Free Stock Analysis Report
