On Apr 22, we reiterated our Neutral recommendation on
Lincoln National Corp.
) based on its enhanced revenue on the back of improved
distribution expansion and pricing. However, higher expenses and
lower operating cash flow raise caution for this Zacks Rank #3
Why the Retention?
Estimates for this life insurer witnessed minor corrections
since the company reported its fourth-quarter 2012 results on Feb
6. Lincoln's fourth-quarter earnings of $1.10 per share and total
revenue of $2.96 billion topped the Zacks Consensus Estimate of
$1.06 and $2.87 billion, respectively. Operating earnings and
revenue also came in higher than the prior-year quarter.
Results were primarily driven by a diversified product
portfolio as well as improved sales, retention and pricing that
led to enhanced deposits, net inflows, ending account balances
and book value. Improved financial leverage also enhances
capitalization, mitigates balance sheet risks and provides
liquidity cushion for long-term investment.
However, higher benefits and commission expenses, economic
volatility, competitive pressures and a low interest rate
environment have been restricting desired investment income
growth. Going ahead, the company is poised to consistently return
incremental capital to its shareholders, as reflected by the
consistent dividend hike, strong capital leverage and sound
Overall, Lincoln delivered positive earnings surprises in all
of the last 4 quarters with an average beat of 7.9%. Following
the release of the fourth-quarter results, the Zacks Consensus
Estimate for 2013 inched up 1.8% to $4.55 per share in the last
60 days. Further, the Zacks Consensus Estimate for 2014 edged up
2.1% to $4.93 per share in the last 60 days.
Other Insurers That Warrant a Look
While Lincoln tends to stay in the neutral lane in the near
term, other stocks in the insurance sector that are outperforming
Montpelier Re Ltd.
EMC Insurance Group Inc.
Hilltop Holdings Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
EMC INSURANCE (EMCI): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
LINCOLN NATL-IN (LNC): Free Stock Analysis
MONTPELIER RE (MRH): Free Stock Analysis
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