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Lincoln National Corporation LNC has been benefiting from a strong Group Protection segment, improved fee income, changes in the business mix, cost-curbing efforts and a robust financial position.
LNC’s Zacks Rank & Price Performance
Lincoln National carries a Zacks Rank #3 (Hold) at present.
The stock has gained 14.1% in the past year.
Robust Growth Prospects of LNC Stock
The Zacks Consensus Estimate for Lincoln National’s 2024 earnings is pegged at $5.74 per share, which indicates an improvement of 10% from the 2023 figure. The consensus mark for revenues is $18.4 billion, implying a rise of 15% from the 2023 figure.
The consensus mark for 2025 earnings is pegged at $7.54 per share, indicating an improvement of 31.3% from the 2024 estimate. The estimate for revenues is $19.1 billion, implying a 3.5% increase from the 2024 estimate.
Solid Return on Equity of LNC
Return on equity in the trailing 12 months is currently 17.1%, which is higher than the industry’s average of 15.5%. This substantiates the company’s efficiency in utilizing shareholders’ funds.
Lincoln National’s Business Tailwinds
Lincoln National's revenues are likely to be bolstered by the strong performance of its Annuities and Group Protection segments, along with higher fee income from variable annuities in the days ahead.
Increased account values and a well-performing alternative investment portfolio have been driving growth in the Annuities segment, which includes a range of variable and fixed annuities as well as indexed products. Key offerings such as the Lincoln Investor Advantage, Lincoln Level Advantage indexed variable annuity and Lincoln ChoicePlus have contributed to this success. Meanwhile, increased scale, broader distribution channels and acquisitions are expected to boost sales in the Group Protection unit. Operating income in the segment grew 16.7% year over year in the first half of 2024.
With expertise in retirement, insurance and wealth protection, Lincoln National serves around 17 million customers, positioning it well for future sales growth.
Lincoln National is also focused on shifting its business mix toward products without long-term guarantees, which are less sensitive to interest rates. Expense management efforts have further supported margin expansion while the adoption of advanced technologies has enhanced operational scale and improved the customer experience.
The company’s financial position remains strong, supported by a steady rise in cash balance. This financial strength allows Lincoln National to pursue growth initiatives and strategically allocate capital through share repurchases and dividend hikes.
Headwinds for LNC
The Life Insurance segment has faced challenges from elevated mortality and morbidity claims linked to the COVID pandemic, which weighed on earnings. While pandemic-related claims have eased, the segment remains pressured by higher reinsurance costs and margin compression. Life Insurance sales dropped 22.1% year over year in the first half of 2024.
Lincoln National has a debt-laden balance sheet, which induces an increase in interest expenses. Its total debt-to-capital ratio of 43.7% at the second-quarter end was significantly higher than the industry average of 14.5%.
Stocks to Consider
Some better-ranked stocks in the insurance space are Assurant, Inc. AIZ, Brighthouse Financial, Inc. BHF and Primerica, Inc. PRI. Assurant sports a Zacks Rank #1 (Strong Buy), and Brighthouse Financial and Primerica carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Assurant’s earnings surpassed estimates in each of the last four quarters, the average surprise being 33.56%. The Zacks Consensus Estimate for AIZ’s 2024 earnings indicates an improvement of 6.8% from the year-ago figure while the estimate for revenues implies growth of 4.9%. The consensus mark for 2024 earnings has moved 0.6% north in the past 30 days.
The bottom line of Brighthouse Financial outpaced earnings estimates in three of the last four quarters and missed once, the average surprise being 3.76%. The Zacks Consensus Estimate for BHF’s 2024 earnings indicates an improvement of 29.8% from the year-ago figure while the estimate for revenues implies growth of 3.8%. The consensus mark for 2024 earnings has moved 1.7% north in the past 30 days.
Primerica’s earnings surpassed estimates in two of the trailing four quarters and missed the mark twice, the average surprise being 1.74%. The Zacks Consensus Estimate for PRI’s 2024 earnings indicates a rise of 11.7% year over year while the estimate for revenues implies an improvement of 5.7%. The consensus mark for 2024 earnings has moved 0.2% north in the past 30 days.
Shares of Assurant, Brighthouse Financial and Primerica have gained 43.7%, 36.5% and 5.3%, respectively, in the past year.
Zacks Investment Research
Shares of Sun Life Financial Inc. SLF closed at $56.08 on Friday, near its 52-week high of $56.16. This proximity underscores investor confidence. It has the ingredients for further price appreciation. The stock is trading above the 50-day and 200-day simple moving average (SMA) of $51.38 and $51.58, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
Earnings of Sun Life grew 5.4% in the last five years, better than the industry average of 4.6%. SLF has a solid surprise history. The life insurer has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 1.76%.
Shares of this third-largest insurer in Canada have gained 8.2% year to date compared with the industry and the Zacks S&P 500 composite’s return of 17.8% each.
SLF YTD Price Performance
Mixed Analyst Sentiment for SLF
Four of the six analysts covering the stock have raised estimates for 2025 over the past 60 days. Two analysts have lowered estimates for 2025.
The Zacks Consensus Estimate for 2025 earnings has moved up 0.5% in the past 60 days, reflecting analysts’ optimism.
The Zacks Consensus Estimate for 2024 implies a 3.1% year-over-year increase, while the same for 2025 suggests a rise of 10.3% year over year.
Sun Life’s Favorable Return on Capital
Return on equity in the trailing 12 months was 17.4%, better than the industry average of 15.5%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting SLF’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 0.7%, better than the industry average of 0.6%.
Key Points to Note for SLF
Sun Life’s focus on the emerging economies of Asia that are expected to provide higher returns and the North American markets bodes well for long-term growth. SLF has a strong presence in China, the Philippines, India, Hong Kong and Indonesia and also forayed into Malaysia and Vietnam. Contribution from Asia business to Sun Life’s earnings has increased to 21% over the last few years.
Sun Life looks to be one of the top five players and remains focused on growing its voluntary benefits business. The life insurer is also improving its business mix and is thus shifting its growth focus toward products that block lower capital and offer more predictable earnings.
Sun Life Investment Management makes investments in private fixed-income mortgages and real estate. It invests in pension plans and other institutional investors. These are indicative of SLF’s efforts to strengthen Asset Management, which provides a higher return on equity, requires lower capital, sees lesser volatility and has the potential for an earnings upside.
Operational efficiency has been aiding Sun Life in building a strong capital position. The life insurer’s capital outlay includes a 40-50% dividend payout over the medium term.
Risks for SLF
Expenses have increased at Sun Life over the past few years due to high employee expenses, premises and equipment, service fees, amortization of intangible assets and other expenses. These, in turn, weigh on margin expansion. The life insurer remains committed toward balancing both metrics, failing which, the bottom line might suffer. The life insurer estimates integration activities to drive run-rate cost savings of $60 million by 2024.
SLF’s Expensive Valuation
The stock is overvalued compared to its industry. It is currently trading at a price-to-earnings multiple of 10.74, higher than the industry average of 8.33.
Shares of other insurers like Reinsurance Group of America, Incorporated RGA and Manulife Financial Corp MFC are also trading at a multiple higher than the industry average.
However, shares of Brighthouse Financial, Inc. BHF are trading at a multiple lower than the industry average.
Wrapping Up: Keep on Holding
Sun Life Financial's favorable growth estimates, financial stability and favorable return on capital make it an attractive stock to retain for current investors.
Despite its expensive valuation, SLF should benefit from its focus on Asia operations, growing asset management businesses and the scale-up and integration of U.S. operations. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Investment Research
Shares of Voya Financial, Inc. VOYA gained 0.5% in the last trading session after the insurer agreed to buy OneAmerica Financial, Inc.’s full-service retirement plan business for an upfront purchase price of $50 million. The transaction, upon materialization, will strengthen the acquirer’s full-service retirement business within Wealth Solutions. This segment accounted for about 41% of total adjusted operating revenues in 2023.
OneAmerica Financial is a diversified mutual insurance organization. Its full-service retirement plan business comprises 401(k), 403(b), 457, non-qualified deferred compensation plans and employee stock ownership plans.
Pending regulatory approvals and other customary closing conditions, the transaction is expected to be completed by Jan. 1, 2025.
Financial Considerations for VOYA
Apart from the upfront payment, Voya will have to pay a deferred consideration of up to $160 million, payable in the second quarter of 2026, depending on plan persistency and transition incentives.
Voya will fund the upfront price, transaction expenses of about $200 million with the existing excess capital of $0.4 billion as of June 30, 2024.
Voya Financial will use the earnings and cash flows of the acquired business to pay the maximum portion of the deferred component of the purchase price.
Acquisition Rationale Favoring VOYA
The addition of OneAmerica Financial’s full-service retirement plan business to VOYA’s portfolio will enhance the latter’s full-service retirement business by adding a broader set of capabilities as well as creating new opportunities for distribution partnerships. It will also help it serve workplace benefits and savings plans in a better way. It will also increase Voya’s Defined Contribution client assets to $580 billion from $519 billion currently, as well as total plan and participant count to 0.06 million and 7.9 million, respectively.
The acquisition will add $47 billion of assets in the emerging and mid-market and expand Voya’s general account to nearly $38 billion by adding about $4 billion of spread-based assets under management. Also, it will extend its top positions in large markets by adding about $15 billion of recordkeeping assets.
This Zacks Rank #3 (Hold) insurer expects to generate not less than $75 million of pre-tax adjusted operating earnings and more than $200 million of net revenues in the first year post-closing.
On the other hand, OneAmerica stands to benefit from gaining access to Voya’s market-leading customer digital experience and core recordkeeping services.
Voya’s Inorganic Growth
Voya Financial has pursued strategic acquisitions that have helped gain new product and distribution capabilities. In January 2023, Voya acquired Benefitfocus, Inc. The deal has expanded Voya’s ability to deliver innovative solutions for employers and better health plans to improve the financial, physical and emotional well-being of their employees. Benefitfocus provides Voya with new capabilities, access to new employer markets and a platform to advance a strategic vision for workplace benefits and savings.
Voya Financial and Allianz Global Investors’ (AllianzGI) long-term strategic partnership has added scale and diversification to Voya Investment Management and continues to deliver outstanding financial results.
Strategic acquisitions bode well for long-term growth.
Voya’s Price Performance
Shares of Voya Financial have gained 3.2% year to date, lagging the industry’s increase of 15.5%.
VOYA shares are trading well above the 50-day moving average, indicating a bullish trend.
VOYA Price Movement vs. 50-Day Moving Average
Voya Financial’s core businesses are higher-growth, higher-return and capital-light businesses and boast a solid presence. Expansion of the distribution network and achievement of efficiencies through automation are expected to drive performance. It boasts a solid capital position supporting effective capital deployment. Consistent cash flow and sufficient cash balances continue to boost liquidity. All these together should help VOYA shares trend higher.
Stocks to Consider
Some top-ranked stocks from the insurance space are Brighthouse Financial BHF, Unum Group UNM and Primerica PRI. Each stock presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brighthouse Financial’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 3.76%.
Year to date, BHF’s stock has lost 20%. The Zacks Consensus Estimate for BHF’s 2024 and 2025 earnings indicates 29.8% and 9.4% year-over-year growth, respectively.
Unum Group delivered a four-quarter average earnings surprise of 2.96%. The stock has gained 20.5% year to date.
The Zacks Consensus Estimate for UNM’s 2024 and 2025 earnings implies a 10.4% and 5.4% year-over-year increase, respectively.
Primerica earnings surpassed estimates in two of the last four quarters and missed in the other two, the average surprise being 1.74%.
Year to date, PRI’s stock has gained 23.1%. The Zacks Consensus Estimate for PRI’s 2024 and 2025 earnings implies 11.7% and 11.6% year-over-year growth, respectively.
Zacks Investment Research
Shares of Brighthouse Financial (BHF) have been struggling lately and have lost 9.5% over the past week. However, a hammer chart pattern was formed in its last trading session, which could mean that the stock found support with bulls being able to counteract the bears. So, it could witness a trend reversal down the road.
The formation of a hammer pattern is considered a technical indication of nearing a bottom with likely subsiding of selling pressure. But this is not the only factor that makes a bullish case for the stock. On the fundamental side, strong agreement among Wall Street analysts in raising earnings estimates for this annuity and life insurance company enhances its prospects of a trend reversal.
What is a Hammer Chart and How to Trade It?
This is one of the popular price patterns in candlestick charting. A minor difference between the opening and closing prices forms a small candle body, and a higher difference between the low of the day and the open or close forms a long lower wick (or vertical line). The length of the lower wick being at least twice the length of the real body, the candle resembles a 'hammer.'
In simple terms, during a downtrend, with bears having absolute control, a stock usually opens lower compared to the previous day's close, and again closes lower. On the day the hammer pattern is formed, maintaining the downtrend, the stock makes a new low. However, after eventually finding support at the low of the day, some amount of buying interest emerges, pushing the stock up to close the session near or slightly above its opening price.
When it occurs at the bottom of a downtrend, this pattern signals that the bears might have lost control over the price. And, the success of bulls in stopping the price from falling further indicates a potential trend reversal.
Hammer candles can occur on any timeframe -- such as one-minute, daily, weekly -- and are utilized by both short-term as well as long-term investors.
Like every technical indicator, the hammer chart pattern has its limitations. Particularly, as the strength of a hammer depends on its placement on the chart, it should always be used in conjunction with other bullish indicators.
Here's What Makes the Trend Reversal More Likely for BHF
There has been an upward trend in earnings estimate revisions for BHF lately, which can certainly be considered a bullish indicator on the fundamental side. That's because a positive trend in earnings estimate revisions usually translates into price appreciation in the near term.
The consensus EPS estimate for the current year has increased 1.7% over the last 30 days. This means that the Wall Street analysts covering BHF are majorly in agreement about the company's potential to report better earnings than what they predicted earlier.
If this is not enough, you should note that BHF currently has a Zacks Rank #2 (Buy), which means it is in the top 20% of more than the 4,000 stocks that we rank based on trends in earnings estimate revisions and EPS surprises. And stocks carrying a Zacks Rank #1 or 2 usually outperform the market. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here
Moreover, a Zacks Rank of 2 for Brighthouse Financial is a more conclusive indication of a potential trend reversal, as the Zacks Rank has proven to be an excellent timing indicator that helps investors identify precisely when a company's prospects are beginning to improve.
Zacks Investment Research
For Immediate Release
Chicago, IL – September 11, 2024 – Zacks Value Investor is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here: https://www.zacks.com/stock/news/2334102/screening-for-cheap-strong-buy-stocks
Screening for Cheap Strong Buy Stocks
Welcome to Episode #381 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
With the second quarter earnings season mostly winding down, Tracey wanted to look for stocks that now have the top Zacks Rank of Strong Buy, which are also cheap.
When a stock has the top Zacks Rank of #1 (Strong Buy), that usually means that the analysts are raising earnings estimates. And why would they be raising earnings estimates during earnings season? Usually because something “good” is going on at the company.
Perhaps they beat on Q2 earnings and raised full year guidance? That would mean the analysts are usually raising their earnings estimates to get into line with what the company has guided.
At any given time, there are usually only about 230 to 240 companies that are Zacks Strong Buy stocks. This is an elite group even without looking for cheap stocks.
Screening for Top Ranked Cheap Stocks
Tracey deployed a Zacks premium screen that looks for cheap Zacks Strong Buy stocks.
The stocks have to be trading over $5 and have over 100,000 per day trading volume. This is to avoid the microcaps or penny stocks.
For “cheapness,” the screen looks for a price-to-earning (P/E) ratio of 20 or under. This is a little bit higher than Tracey normally looks for. She uses 15x. But it will mean a few more stocks to look at.
The P/E is then combined with the price-to-sale (P/S) ratio under 1.0. A P/S ratio under 1.0 means you are getting a deal on the sales. A P/S of 0.7, for example, means you are paying just $0.70 for every $1.00 of sales.
This screen produced 32 matches.
3 Cheap Strong Buy Stocks
1. Assurant, Inc. AIZ
Assurant is a global business services company which is in insurance. In its second quarter earnings report it said it was raising its 2024 enterprise outlook.
4 estimates are higher in the last 60 days for both 2024 and 2025. Earnings are now expected to rise 6.8% in 2024 and 6.1% in 2025. Assurant is cheap. It trades with a forward P/E of just 11.6 and has a P/S ratio of just 0.9.
Assurant also pays a dividend, yielding 1.5%. Shares of Assurant are up 14.7% year-to-date, which is in-line with the S&P 500.
Should an insurer, like Assurant, be on your value stock short list?
2. Synchronoss Technologies, Inc. SNCR
Synchronoss Technologies is a leader in personal cloud. It is a small cap company, with a market cap of just $153.7 million.
2 estimates are up for 2025 in the last 60 days pushing up the Zacks Consensus to $1.15 from $0.35. This is lightly covered on the Street, however. Synchronoss Technologies shares have soared 120% year-to-date, but it’s still cheap with a forward P/E of just 11.
Synchronoss is a subscription-based company with recurring revenue. It recently announced it had retired the company’s preferred stock and reduced the total net debt using a new $75 million term loan facility.
Should value investors consider Synchronoss Technologies?
3. LSI Industries Inc. (LYTS)
LSI Industries makes commercial lighting and display solutions. Headquartered in Cincinnati, it has 1900 employees across 16 facilities. It is another small cap company with a market cap of $457 million.
LSI Industries has fallen to a Zacks Rank #2 (Buy) from a Strong Buy since the podcast was recorded, but the Zacks Rank can change daily. One estimate was higher in the last 30 days for both fiscal 2025 and fiscal 2026. Earnings are expected to rise 6% in fiscal 2025 and 34% in fiscal 2026.
Shares of LSI Industries have risen 12.1% year-to-date. It’s cheap with a P/E of 17.2. Even though it’s a small cap, it pays a dividend, yielding 1.3%.
Should a small cap like LSI Industries be on your short list?
What Else Should You Know About Top Ranked Cheap Stocks?
Tune into this week’s podcast to find out.
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Zacks Investment Research
Welcome to Episode #381 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
With the second quarter earnings season mostly winding down, Tracey wanted to look for stocks that now have the top Zacks Rank of Strong Buy, which are also cheap.
When a stock has the top Zacks Rank of #1 (Strong Buy), that usually means that the analysts are raising earnings estimates. And why would they be raising earnings estimates during earnings season? Usually because something “good” is going on at the company.
Perhaps they beat on Q2 earnings and raised full year guidance? That would mean the analysts are usually raising their earnings estimates to get into line with what the company has guided.
At any given time, there are usually only about 230 to 240 companies that are Zacks Strong Buy stocks. This is an elite group even without looking for cheap stocks.
Screening for Top Ranked Cheap Stocks
Tracey deployed a Zacks premium screen that looks for cheap Zacks Strong Buy stocks.
The stocks have to be trading over $5 and have over 100,000 per day trading volume. This is to avoid the microcaps or penny stocks.
For “cheapness,” the screen looks for a price-to-earning (P/E) ratio of 20 or under. This is a little bit higher than Tracey normally looks for. She uses 15x. But it will mean a few more stocks to look at.
The P/E is then combined with the price-to-sale (P/S) ratio under 1.0. A P/S ratio under 1.0 means you are getting a deal on the sales. A P/S of 0.7, for example, means you are paying just $0.70 for every $1.00 of sales.
This screen produced 32 matches.
3 Cheap Strong Buy Stocks
1. Assurant, Inc. (AIZ)
Assurant is a global business services company which is in insurance. In its second quarter earnings report it said it was raising its 2024 enterprise outlook.
4 estimates are higher in the last 60 days for both 2024 and 2025. Earnings are now expected to rise 6.8% in 2024 and 6.1% in 2025. Assurant is cheap. It trades with a forward P/E of just 11.6 and has a P/S ratio of just 0.9.
Assurant also pays a dividend, yielding 1.5%. Shares of Assurant are up 14.7% year-to-date, which is in-line with the S&P 500.
Should an insurer, like Assurant, be on your value stock short list?
2. Synchronoss Technologies, Inc. (SNCR)
Synchronoss Technologies is a leader in personal cloud. It is a small cap company, with a market cap of just $153.7 million.
2 estimates are up for 2025 in the last 60 days pushing up the Zacks Consensus to $1.15 from $0.35. This is lightly covered on the Street, however. Synchronoss Technologies shares have soared 120% year-to-date, but it’s still cheap with a forward P/E of just 11.
Synchronoss is a subscription-based company with recurring revenue. It recently announced it had retired the company’s preferred stock and reduced the total net debt using a new $75 million term loan facility.
Should value investors consider Synchronoss Technologies?
3. LSI Industries Inc. (LYTS)
LSI Industries makes commercial lighting and display solutions. Headquartered in Cincinnati, it has 1900 employees across 16 facilities. It is another small cap company with a market cap of $457 million.
LSI Industries has fallen to a Zacks Rank #2 (Buy) from a Strong Buy since the podcast was recorded, but the Zacks Rank can change daily. One estimate was higher in the last 30 days for both fiscal 2025 and fiscal 2026. Earnings are expected to rise 6% in fiscal 2025 and 34% in fiscal 2026.
Shares of LSI Industries have risen 12.1% year-to-date. It’s cheap with a P/E of 17.2. Even though it’s a small cap, it pays a dividend, yielding 1.3%.
Should a small cap like LSI Industries be on your short list?
What Else Should You Know About Top Ranked Cheap Stocks?
Tune into this week’s podcast to find out.
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