Will Reduced Premiums Hurt MetLife's (MET) Q2 Earnings?
MetLife, Inc. MET is set to report its second-quarter 2023 results on Aug 2, after the closing bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for second-quarter earnings per share of $1.85 has declined by 5 cents in the past week. The estimated figure suggests a decrease of 7.5% from the prior-year reported number. Also, the consensus estimate for second-quarter revenues of $17.1 billion indicates a 6.4% fall from the year-ago reported figure.
MetLife’s earnings beat the consensus estimate in two of the prior four quarters and missed twice, with the average surprise being 0.7%. This is depicted in the graph below:
MetLife, Inc. Price and EPS Surprise
MetLife, Inc. price-eps-surprise | MetLife, Inc. Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at MET’s previous-quarter performance first.
Q1 Earnings Rewind
In the last reported quarter, the leading insurance-based global financial services company reported adjusted operating earnings per share of $1.52, missing the Zacks Consensus Estimate by 17.8% due to reduced returns, lower investment income despite a high interest rate environment and rising expenses. The negatives were partially offset by volume growth across some segments and improved contributions from the U.S., EMEA and Latin America businesses.
Now let’s see how things have shaped up prior to the second-quarter earnings announcement.
Q2 Factors to Note
Reduced premiums, higher costs and weaker performance in the Retirement & Income Solutions business are likely to have affected MetLife’s second-quarter results. Our estimate for premiums for the quarter under review suggests a fall of more than 6% from the prior-year quarter.
Also, our model indicates that Universal Life and Investment-Type Product Policy Fees for the second quarter will see a 7.3% year-over-year decrease. Rising costs and expenses are likely to have affected the company’s profit levels in the to-be-reported quarter. Our estimate for total expenses for the second quarter indicates a more than 5% year-over-year increase.
The company is expected to have witnessed lower profits from Retirement & Income Solutions and MetLife Holdings businesses in the second quarter. While we expect adjusted pre-tax income from the Retirement & Income Solutions business to have declined almost 14% year over year, the same from MetLife Holdings is likely to have dropped more than 28%.
Further, our estimate for adjusted pre-tax income in Asia indicates a nearly 38% plunge from the prior-year period. The above-mentioned factors are likely to have led to a year-over-year decline in profits, making an earnings beat uncertain.
However, our estimate for net investment income indicates a 21.7% year-over-year increase from the year-ago period. We expect MET’s U.S. Group Benefits’ adjusted revenues to increase 1.7% from the prior-year quarter’s reading.
Our estimate for adjusted revenues in Latin America indicates a jump of 11.4% from the year-ago period’s actuals. These are expected to have partially offset the negatives in the quarter under review.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for MetLife this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at $1.85 per share, in line with the Zacks Consensus Estimate.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: MetLife currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for MetLife, here are some companies in the broader Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
American Equity Investment Life Holding Company AEL has an Earnings ESP of +1.12% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for American Equity Investment’s bottom line for the to-be-reported quarter is pegged at $1.65 per share, which indicates a 68.4% increase from the year-ago period. The consensus estimate for AEL’s revenues is pegged at $555 million.
Ares Management Corporation ARES has an Earnings ESP of +0.20% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Ares Management’s bottom line for the to-be-reported quarter is pegged at 84 cents per share, suggesting a 13.5% year-over-year increase. The consensus estimate for revenues is pegged at $725.8 million. ARES beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 2%.
Aflac Incorporated AFL has an Earnings ESP of +1.41% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Aflac’s bottom line for the to-be-reported quarter is pegged at $1.42 per share, which remained stable over the past week. AFL beat earnings estimates in all the past four quarters, with an average surprise of 8.2%.
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MetLife, Inc. (MET) : Free Stock Analysis Report
Aflac Incorporated (AFL) : Free Stock Analysis Report
American Equity Investment Life Holding Company (AEL) : Free Stock Analysis Report
Ares Management Corporation (ARES) : Free Stock Analysis Report
