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Voya (VOYA) Down 1% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Voya Financial (VOYA). Shares have lost about 1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Voya due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Voya Financial Q2 Earnings Top Estimates, Revenues Lag

Voya Financial's second-quarter 2019 net operating income of $1.52 per share beat the Zacks Consensus Estimate by 3.4%. The bottom line improved 34.5% year over year. The results reflect continued strong organic growth in each of its core businesses.

The company’s revenues of $278 billion increased 16.8% from the year-ago quarter. However, the top line missed the Zacks Consensus Estimate by 11.5%.

Assets under management and administration were $560 billion as of Jun 30, 2019.

Segmental Update

Retirement’s adjusted operating earnings of $180 million increased 7% year over year on the back of positive DAC/VOBA and other intangibles, higher fee-based margin primarily due to equity market growth and higher investment income, partially offset by higher administrative expenses.

Investment Management posted adjusted operating earnings of $41 million, down 21.2% year over year due to lower fee-based margin and higher expenses, partially offset by higher investment capital revenues

It generated $772 million of institutional net flows, reflecting strong commercial growth in the business and recorded the 14th straight quarter of positive institutional net flows.

Employee Benefits’ adjusted operating earnings were $49 million, up 40% year over year on the back of higher underwriting results primarily driven by growth in the Voluntary block as well as improvement in loss ratios of Group Life and Stop Loss, and higher investment income, partially offset by higher administrative expenses.

Individual Life’s adjusted operating earnings were $47 million, up 14.6%year over year on lower negative DAC/VOBA and other intangibles unlocking, higher investment income, partially offset by lower net underwriting gain.

Corporate incurred adjusted operating losses of $39 million, narrower than the year-ago quarterly loss of $59 million owing to a decline in stranded costs that resulted from the company's sale of substantially all its individual annuities businesses on Jun 1, 2018.

Financial Update

Voya Financial exited the second quarter with $540 million in excess capital.

In the quarter under review, the company completed its $236-million accelerated share repurchase deal and entered into a new $200-million accelerated share repurchase agreement.

Year to date, the company has bought back shares worth $646 million.

The company hiked its dividend to 15 cents, up from the prior payout of 1 cent. This is in line with the company's plan to increase the dividend yield to at least 1%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Voya has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 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. Notably, Voya has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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