Tags: LNC | insurance | financial | stocks

Lincoln National Shines in Unfavored Sector

By Tim Plaehn   |   Monday, 19 Sep 2011 09:41 AM

As an insurance company, Lincoln National (LNC) has built its business in a couple of well-defined sectors within the larger financial sector. However, the stock market tends to paint all stocks within a sector with the same brush. A look at Lincoln National as an investor means asking whether to invest in a pretty good company in an out-of-favor sector.

Lincoln National divides the company's business into two divisions: The Retirement Solutions business sells fixed and variable annuity products and sells and manages defined contributions pension plans. The insurance solutions division sells individual life insurance policies and provides group insurance in the forms of life, disability, dental, and accident insurance.

For the first and second quarters of 2011, Lincoln National reported income per share from continuing operations of $1.09 and $1.09, respectively, up from 83 cents and 86 cents a year earlier. In both quarters the earnings exceeded the consensus estimate by about 15 percent. The results are on path to easily beat the current consensus estimate of $4.09 per share from continuing operations.

Sector woes

Although the financial results for Lincoln National have recovered nicely since the financial crisis 2008 and 2009, the share price tends to follow the results of the overall financial sector. The sector as tracked by the S&P 500 lost 30 percent of its value from spring of 2011 through the end of summer. In the same time frame LNC shed 40 percent of its value.

The share price was further hurt on fears from Hurricane Irene, even though the company is not in the property and casualty insurance business.

The Wall Street analysts following LNC have not revisited the stock since putting out ratings in the spring of 2011. At that time, analysts at FBR Capital rated the stock to outperform and Barclays gave it an equal weight rating.

The fact that FNC stock price has been closely tied to the overall financial sector signals that prospective investors should review the whole sector at the same time as taking a look at Lincoln National alone. The company next reports on Nov. 2.

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As an insurance company, Lincoln National (LNC) has built its business in a couple of well-defined sectors within the larger financial sector. However, the stock market tends to paint all stocks within a sector with the same brush. A look at Lincoln National as an investor...
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