Why Is Manulife (MFC) Up 11.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Manulife Financial (MFC). Shares have added about 11.4% in that time frame, outperforming 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 catalysts.
Manulife Q2 Earnings Beat Estimates, NBV Sales Rise Y/Y
Manulife Financial Corporation delivered second-quarter 2024 core earnings of 66 cents per share, which beat the Zacks Consensus Estimate by 3.1%. The bottom line improved 6.4% year over year.
Core earnings of $1.3 billion (C$1.7 billion) increased 8.3% year over year. The improvement was driven by continued business growth momentum and updates to actuarial methods and assumptions in the second half of 2023, higher fee income from favorable market impacts and positive net flows, a favorable tax true-up, strong growth in Group Insurance and favorable net insurance experience.
New business value (NBV) in the reported quarter was $528 million (C$723 million), up 21.4% year over year. New business contractual service margin (CSM) of $459 million (C$628 million) rose 4.1% year over year.
Annualized premium equivalent (APE) sales increased 16.7% year over year to $1.4 billion (C$1.9 billion), attributable to higher sales in Asia and Canada.
The expense efficiency ratio increased 30 basis points (bps) to 45.4%. The increase reflects a rise of 6% and 7% in pre-tax core earnings and core expenses, respectively.
Wealth and asset management assets under management and administration were $682 billion (C$933.1 billion), up 10.3% year over year. Retail net outflows of $0.1 billion remained unchanged year over year, as increased demand for investment products amid equity market recovery and improved investor sentiment was offset by higher redemptions.
Core return on equity, measuring the company’s profitability, expanded 20 bps year over year to 15.7%. The financial leverage ratio deteriorated 120 basis points to 24.6% at the end of the quarter. Life Insurance Capital Adequacy Test ratio was 139% as of Jun 30, 2024, up from 136% reported in the year-ago quarter. Adjusted book value per common share was $33.96, up 15% year over year.
Segmental Performance
Global Wealth and Asset Management division’s core earnings came in at $291.6 million (C$399 million), up 22.5% year over year. Asia division’s core earnings totaled $472 million, up 40% year over year. NBV, APE sales and new business CSM increased 19%, 7% and 10%, respectively, year over year, reflecting higher sales volumes in Japan and Hong Kong.
Manulife Financial’s Canada division’s core earnings of $294 million (C$402 million) were up 6.1% year over year. APE sales and NBV increased 61% and 50%, respectively, driven by higher sales volumes in all business units, led by a large-case Group Insurance sale. New business CSM grew 33%, driven by margin expansion in Individual Insurance and higher sales volumes in segregated fund products.
The U.S. division reported core earnings of $303 million, down 11% year over year. APE sales decreased 4% year over year with a shift in product mix, while NBV grew 3%. New business CSM decreased 30% due to a change in product mix and the impact of higher interest rates.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
VGM Scores
Currently, Manulife has a subpar Growth Score of D, 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
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 belongs to the Zacks Insurance - Life Insurance industry. Another stock from the same industry, Lincoln National (LNC), has gained 7.1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
Lincoln National reported revenues of $4.53 billion in the last reported quarter, representing a year-over-year change of -4.3%. EPS of $1.84 for the same period compares with $2.02 a year ago.
For the current quarter, Lincoln National is expected to post earnings of $1.70 per share, indicating a change of +639.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.5% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Lincoln National. Also, the stock has a VGM Score of D.
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Manulife Financial Corp (MFC) : Free Stock Analysis Report
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