On Monday, Piper Sandler adjusted its outlook on Lincoln National Corporation (NYSE:NYSE:LNC) shares, reducing the price target from $32.00 to $30.00 while maintaining a Neutral rating on the stock.
The firm's assessment follows Lincoln National's ongoing strategic repositioning efforts, which aim to strengthen the company's capital foundation to ensure stability through various market cycles and to support profitable growth.
Lincoln National is focusing on optimizing its operating model to achieve scale through expense efficiencies and general account optimization. Additionally, the company is working towards delivering profitable growth by realigning its product offerings towards those with more stable cash flows. This strategy is intended to maximize risk-adjusted returns and reduce sensitivity to fluctuations in equity markets.
The firm noted that Lincoln National's distribution channels have been affected by new competitors entering the registered index-linked annuity (RILA) market.
In response, Lincoln National is developing generation 2.0 products to enhance its competitiveness in distribution. Piper Sandler views this move as indicative of the commoditization of the product within the industry.
The revised price target reflects a change in the expected earnings multiple for 2025, which has been lowered to 4x from the previous 4.4x. This adjustment is based on lower peer group multiples observed by Piper Sandler.
Despite these changes, the firm's stance on Lincoln National remains neutral, indicating a wait-and-see approach to the company's stock as it implements its strategic initiatives.
InvestingPro Insights
Lincoln National Corporation (NYSE:LNC) has been the subject of recent analyst revisions and market analysis. According to InvestingPro insights, six analysts have revised their earnings upwards for the upcoming period, signaling positive sentiment towards the company's financial prospects. This aligns with Piper Sandler's observation of Lincoln National's strategic repositioning efforts to ensure stability and support profitable growth.
With a market capitalization of approximately $4.78 billion and a notably low price-to-earnings (P/E) ratio of 3.79, which adjusts to an even lower 3.47 for the last twelve months as of Q1 2024, Lincoln National is trading at a low earnings multiple. This could be indicative of a potential undervaluation, considering the company's long-standing history of maintaining dividend payments for 54 consecutive years and a current dividend yield of 6.41%.
Despite a revenue decline of 33.27% over the last twelve months as of Q1 2024, the company has seen a quarterly revenue growth of 7.92% in Q1 2024, suggesting a possible turnaround in its financial performance. Investors might find these figures compelling when assessing the company's ability to generate stable cash flows and optimize its operating model for future profitability. For those interested in further analysis, InvestingPro offers additional tips on Lincoln National, which can be accessed with a special discount using the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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