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Why Is Brighthouse Financial (BHF) Up 9.4% Since Last Earnings Report?

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Zacks Equity Research
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It has been about a month since the last earnings report for Brighthouse Financial (BHF). Shares have added about 9.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Brighthouse Financial 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.

Brighthouse Q4 Earnings Beat Estimates, Revenues Miss

Brighthouse Financial fourth-quarter 2020 adjusted net income of $3.03 per share surpassed the Zacks Consensus Estimate by 10.9%. Moreover, the bottom line improved 23.2% year over year.

The reported quarter witnessed continued sales growth in annuities and lower expenses. For 2020, adjusted net income was $10.19 per share.

Behind the Headlines

Total revenues of $131 billion missed the Zacks Consensus Estimate by 93.7%. Moreover, the top line declined 57.2% year over year, mainly due to derivative loss of $2.4 billion.

Premiums of $191 million decreased 8.6% year over year.

Adjusted net investment income was $1 billion in the quarter under review, up 15.3% year over year. The improvement was driven primarily by higher alternative investment income. Investment income yield was 4.56%.

Corporate expenses of $236 million pretax decreased 16.6% year over year.

Total expenses declined 14.4% year over year to $1.4 billion due to a decrease in policyholder benefits and claims and interest expense on debt.

Quarterly Segmental Update

Annuities reported adjusted operating income of $293 million, up 10.6% year over year, reflecting lower expenses, higher net investment income, higher fees, and lower deferred acquisition costs (DAC) amortization. Annuity sales increased 57.7% to $2.9 billion.

Life generated adjusted operating income of $13 million, down 82.7% year over year due to lower underwriting margin, partially offset by higher net investment income and lower expenses. Life insurance sales were $15 million, which compared favorably with the prior-year sales of $12 million.

Adjusted operating earnings of Run-off were $25 million, up 316.7% year over year, reflecting higher net investment income, partially offset by a lower underwriting margin.

Adjusted operating loss at Corporate & Other was $142 million, which was wider than the prior-year loss of $64 million.

Financial Update

The company’s cash and cash equivalents were $4.1 billion, up 42.8% year over year.

Shareholders’ equity of $18 billion at the end of the quarter increased 11.4% year over year.

Book value per share, excluding accumulated other comprehensive income (AOCI), was $124.10 as of Dec 31, 2020, up 5.1% year over year.

Share Buyback Program

Brighthouse bought back shares worth $97 million in the quarter under review. Moreover, the company also announced repurchase of up to an additional $200 million of common stock.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.25% due to these changes.

VGM Scores

At this time, Brighthouse Financial has a poor Growth Score of F, 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 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, Brighthouse Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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