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What's in Store for Lincoln National's (LNC) Earnings in Q3?

Zacks Equity Research
·4 min read

Lincoln National Corp.’s LNC third-quarter earnings release is scheduled for Nov 4, 2020, after market close. The company is anticipated to register a decline in earnings but an increase in revenues from the respective year-ago reported figures when it announces quarterly financial numbers.

In the last reported quarter, Lincoln National’s bottom line missed the Zacks Consensus Estimate by 36.2% and also declined 59% year over year due to elevated claims experience from COVID-19 and the negative returns within the company’s alternative investment portfolio.

Q3 Estimates

The Zacks Consensus Estimate for this insurance and retirement business’ quarterly earnings stands at $2.16 per share, implying a decline of 2.7% from the year-ago quarter’s reported figure.

The consensus mark for revenues is pegged at $4.74 billion, indicating a 2.2% rise from the year-earlier quarter’s reported number.

Factors Likely to Impact Q3 Results

In the company’s Annuities segment, strategic actions like shifting to products with higher returns for maintaining capital and liquidity position and respond in the low interest rate environment induced lower deposits for the six months ended Jun 30, 2020  This trend is expected to have continued in the third quarter as well. Thus, premiums earned in the segment might have been under pressure in the period.

In the company’s Life Insurance segment, strategic repricing steps to manage capital and liquidity in the low interest rate environment resulted in sales decline for the six months ended Jun 30, 2020. The company expects this trend to continue for the remainder of 2020 too, which in turn, may weigh on the segmental top line. Also, higher mortality is expected for the rest of the ongoing year due to the COVID-19 pandemic impact. This, in turn, is likely to compress the segment’s margins.

The company’s Group Protection segment is likely to reflect an elevated loss ratio in its upcoming quarterly results due to unfavorable mortality, primarily as a result of the COVID-19 adversity on its life business, higher incidence and lower claim resolutions. Also, a partial pandemic impact on its disability business might get reflected in the impending earnings release. Further, morbidity headwinds stemming from economic volatility are expected to have affected the disability business.

The prevalent low interest rate environment is likely to have kept investment yields stressed. Net investment income — an important driver of the company’s top line— is likely to have suffered losses on alternative investments.

The company is focusing on expense discipline. During the second quarter of 2020, it implemented a plan to significantly reduce expenses in 2020 with the expectation of consistently managing expenses aggressively going forward. This, in turn, might have decreased expenses in the to-be-reported quarter.

Temporary cessation of share buybacks due to COVID crisis, which induced market uncertainty, is expected to have deprived the bottom line of the cushion that the same provides.

Earnings Surprise History

Over the last four quarters, the company’s earnings beat the consensus estimate only once (missed the mark in the remaining three periods), the average surprise being -9.94%.

Lincoln National Corporation Price and EPS Surprise

Lincoln National Corporation Price and EPS Surprise
Lincoln National Corporation Price and EPS Surprise

Lincoln National Corporation price-eps-surprise | Lincoln National Corporation Quote

Here is what our quantitative model predicts:

Our proven model does not predict an earnings beat for Lincoln National 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 beating estimates, which is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

Earnings ESP: Lincoln National has an Earnings ESP of 0.00%.

Zacks Rank: Lincoln National currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Some stocks worth considering with the perfect combination of elements to surpass estimates this reporting cycle are as follows:

You can see the complete list of today’s Zacks #1 Rank stocks here.

Sun Life Financial Inc. SLF has an Earnings ESP of +4.65% and a Zacks Rank #3 at present.

Manulife Financial Corp. MFC has an Earnings ESP of +3.85% and is currently Zacks #3 Ranked.

Green Dot Corporation GDOT  has an Earnings ESP of +5.88% and is a #3 Ranked player, currently.

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Lincoln National Corporation (LNC) : Free Stock Analysis Report
Manulife Financial Corp (MFC) : Free Stock Analysis Report
Sun Life Financial Inc. (SLF) : Free Stock Analysis Report
Green Dot Corporation (GDOT) : Free Stock Analysis Report
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