American Equity (AEL) Up 3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for American Equity Investment (AEL). Shares have added about 3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American Equity 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.
American Equity Q3 Earnings Beat, Revenues Rise Y/Y
American Equity Investment reported third-quarter 2023 adjusted net earnings of $2.45 per share, which beat the Zacks Consensus Estimate by 45.8%. The bottom line rebounded from the year-ago loss of 10 cents per share.
The quarterly results reflected higher annuity product charges and other revenues as well as improved benefits, offset by lower premiums and investment income.
Operational Update
Operating total revenues were $694.3 million, up 1.4% year over year due to higher annuity product charges and other revenues.
Premiums and other considerations decreased 6.4% year over year to $2.6 million. The figure was lower than our estimate of $3.2 million. Annuity product charges increased 38.6% year over year to $84.3 million. The figure was higher than our estimate of $60.6 million.
Net investment income decreased 3.8% on a year-over-year basis to $586.6 million. The figure was higher than our estimate of $549.7 million.
Total benefits were $343.1 million, greater than the year-ago quarter’s benefits of $74.4 million.
The investment spread was 2.73%, which has remained unchanged from the year-ago quarter.
Financial Update
Cash and cash equivalents were $10.2 billion as of Sep 30, 2023, which surged more than fivefold from 2022-end. Total investments were $44.6 billion, which decreased 13.1% from 2022-end.
Notes and loan payable totaled $787 million, down 0.6% from 2022-end.
Book value per common share, excluding AOCI, was $73.18, up 15% from 2022-end.
Total debt/total capitalization was 11.9%, deteriorating 70 basis points from 2022-end.
Non-GAAP operating return on equity, excluding average AOCI and average net impact of fair value accounting for fixed index annuities, was 18.6%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, American Equity 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 quintile 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise American Equity has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
American Equity is part of the Zacks Insurance - Life Insurance industry. Over the past month, Voya Financial (VOYA), a stock from the same industry, has gained 4.9%. The company reported its results for the quarter ended September 2023 more than a month ago.
Voya reported revenues of $281 million in the last reported quarter, representing a year-over-year change of -21.1%. EPS of $2.07 for the same period compares with $2.30 a year ago.
For the current quarter, Voya is expected to post earnings of $2.08 per share, indicating a change of -4.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -2% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Voya. Also, the stock has a VGM Score of C.
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American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report
Voya Financial, Inc. (VOYA) : Free Stock Analysis Report
