On Friday, CFRA made adjustments to its outlook on Lincoln National Corporation (NYSE:LNC), raising the price target to $28 from $25, while maintaining a Hold rating on the stock. The revision reflects a new valuation based on the firm's earnings per share (EPS) estimates for the coming years.
Lincoln National's fourth-quarter earnings per share of $1.45 fell short of CFRA's estimate of $1.75 but surpassed the consensus estimate of $1.33. The company's annual EPS for 2023 was $5.22, which was an improvement from the previous year's loss of $5.22. This performance exceeded the consensus estimate of $5.11 and was achieved through various business segments. Notably, Annuity profits declined by 8%, while Group Protection profits increased significantly to $299 million, up from $41 million. However, Retirement Plan profits were down by 19%.
Despite these mixed results, CFRA reduced its operating EPS estimate for Lincoln National to $7.50 for 2025, a decrease of $0.90. The EPS estimate for 2024 was also cut by $0.90 to $6.50. These revised estimates are based on the company's historical valuation multiples, which include a one-year average forward multiple of 3.4 times and a peer average of 8.8 times.
CFRA anticipates that Lincoln National's revenues will remain relatively stable in 2024, with potential growth of up to 5% as the company withdraws from unprofitable lines of business. The firm also forecasts that Lincoln National's risk-based capital levels (RBC) will improve to between 400% and 410%, a notable increase from the year-end 2022 figure of 377%.
Despite the increased price target and some progress made in 2023, CFRA advises investors not to add to their positions in Lincoln National. The firm cites ongoing challenges faced by the company, even though the stock currently offers a dividend yield of 6.8%.
InvestingPro Insights
Lincoln National Corporation (NYSE:LNC) has shown a mixed financial performance in recent times, with CFRA adjusting its outlook and price target for the company. To provide additional context, let's consider some key metrics and insights from InvestingPro that could help investors better understand the company's position.
InvestingPro data indicates a market capitalization of $4.27 billion for Lincoln National, reflecting the size and scale of the company within the insurance sector. Despite a challenging past year, Lincoln National's revenue for the last twelve months as of Q4 2023 stood at $11.64 billion. However, this represents a significant decline of 37.95% in revenue growth compared to the previous period. The company's gross profit margin was also in negative territory at -5.7%, which aligns with one of the InvestingPro Tips highlighting weak gross profit margins.
On a more positive note, Lincoln National's dividend yield is currently at an attractive 6.82%, supporting the notion that the company pays a significant dividend to shareholders. This is further bolstered by the company's impressive track record of maintaining dividend payments for 54 consecutive years, a testament to its commitment to returning value to shareholders. Additionally, the company has liquid assets that exceed its short-term obligations, suggesting a stable liquidity position.
For investors seeking a deeper dive into the financial health and future prospects of Lincoln National, there are more InvestingPro Tips available. These include expectations of net income growth this year and predictions by analysts that the company will return to profitability within the same timeframe. However, it is worth noting that four analysts have recently revised their earnings estimates downwards for the upcoming period, which could be a point of consideration for potential investors.
For those interested in exploring these and other insights, you can find additional InvestingPro Tips by visiting https://www.investing.com/pro/LNC. Moreover, to enhance your InvestingPro experience, use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With a total of 9 additional tips listed on InvestingPro, investors can gain a comprehensive understanding of Lincoln National's financial landscape and make more informed decisions.
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