Equitable Holdings’ SWOT analysis: stock poised for growth amid challenges

Equitable Holdings, Inc. (NYSE:EQH), a leading financial services company, has been attracting significant attention from analysts and investors alike. The company’s strong position in the Registered Index-Linked Annuity (RILA) market, coupled with its strategic initiatives and capital management, has positioned it for potential growth. However, recent financial results and industry challenges have raised questions about its near-term performance. This comprehensive analysis examines Equitable Holdings’ current standing, future prospects, and the factors that could influence its stock performance.

Company Overview

Equitable Holdings operates in the North American insurance and life sector, offering a diverse range of products and services for retirement, protection, and investment needs. With a market capitalization of $15.74 billion, the company has established itself as a dominant player in the rapidly expanding RILA market, which has become the fastest-growing segment within variable annuities. According to InvestingPro data, the company has demonstrated impressive revenue growth of 45.39% over the last twelve months, highlighting its strong market position.

Financial Performance

In the first quarter of 2025, Equitable Holdings reported operating earnings per share (EPS) of $1.30, or $1.35 when excluding unfavorable alternative investment income. This figure fell short of consensus estimates of $1.47, primarily due to worse-than-expected mortality experience in the Protection Solutions segment, which had an approximate $0.10 impact on EPS.

Despite the earnings miss, Equitable Holdings maintains strong capital metrics. The company reported pro forma holdco cash of approximately $1.1 billion, well above its target of $0.5 billion. This robust capital position, supported by a healthy current ratio of 1.9x and strong liquidity metrics according to InvestingPro, provides significant financial flexibility and potential for strategic capital deployment. InvestingPro analysis suggests the stock is currently trading below its Fair Value, presenting a potential opportunity for investors. For detailed valuation metrics and additional insights, check our comprehensive undervalued stocks analysis.

Market Position and Competitive Landscape

Equitable Holdings has established itself as a leader in the RILA market, which has been experiencing rapid growth. This market leadership positions the company to capitalize on the increasing demand for retirement products, particularly among an aging population and as Baby Boomers reach peak retirement years.

The company’s RILA products are particularly attractive to investors seeking equity exposure with downside protection. These products are capital-light and offer high internal rates of return, making them appealing from both a consumer and company perspective.

Strategic Initiatives

One of the most significant strategic moves for Equitable Holdings is the ongoing process of selling approximately 75% of its Protection business to Reinsurance Group of America (NYSE:RGA). This transaction is expected to close mid-year and could provide an incremental capital benefit of around $2 billion upon completion.

This divestiture aligns with Equitable Holdings’ broader strategy of optimizing capital consumption and enhancing transparency in its operations. The company’s focus on capital-light products and efficient capital management is expected to drive more predictable and transparent cash flows in the coming years.

Risks and Challenges

While Equitable Holdings has demonstrated strengths in several areas, it also faces notable challenges. The recent underperformance in the Protection Solutions segment due to adverse mortality experience highlights the ongoing risks associated with this business line. Additionally, the company reported modestly higher expenses in its Individual Retirement and Legacy segments during the first quarter of 2025.

Market volatility remains a persistent risk factor for Equitable Holdings, as it can impact investor demand for annuities and other investment products. Furthermore, potential regulatory changes in the financial services industry could affect the company’s product offerings or profitability.

Future Outlook

Analysts project that Equitable Holdings will generate annual cash flows of approximately $2.0 billion by 2027, reflecting the company’s focus on predictable and transparent financial performance. The anticipated capital infusion from the sale of the Protection business is expected to further strengthen the company’s financial position and provide additional resources for growth initiatives or shareholder returns.

The company’s earnings growth for the current fiscal year is projected to be on the lower end of the 12-15% range, which is below current consensus estimates. Trading at a P/E ratio of 14.26x and maintaining a seven-year streak of dividend increases, the company continues to demonstrate shareholder-friendly policies. The long-term outlook remains positive, supported by favorable demographic trends and the company’s strong market position in growing product segments. InvestingPro subscribers have access to over 30 additional financial metrics and insights that can help evaluate EQH’s growth potential more comprehensively.

Bear Case

How might continued mortality challenges impact EQH’s financial performance?

The recent earnings miss due to worse-than-expected mortality experience in the Protection Solutions segment raises concerns about the potential for ongoing challenges in this area. If mortality rates continue to deviate from actuarial expectations, it could lead to further earnings volatility and potentially impact the company’s ability to meet its financial targets.

Moreover, while Equitable Holdings is in the process of selling a significant portion of its Protection business, the remaining exposure could still pose risks to the company’s overall financial performance. Continued underperformance in this segment may necessitate additional reserves or pricing adjustments, which could pressure profitability in the near term.

What risks does the sale of the Protection business pose to EQH’s revenue streams?

While the sale of 75% of the Protection business to RGA is expected to provide a substantial capital benefit, it also represents a reduction in Equitable Holdings’ diversified revenue streams. This divestiture could potentially leave the company more exposed to fluctuations in its remaining business segments, particularly if market conditions or consumer preferences shift unexpectedly.

Additionally, the transition period following the sale may present operational challenges as the company adjusts its business model and reallocates resources. There is also the risk that the anticipated capital benefits from the sale may not fully materialize or may be deployed less effectively than expected, which could impact the company’s long-term growth prospects.

Bull Case

How could EQH’s strong capital position benefit shareholders in the coming years?

Equitable Holdings’ robust capital position, with pro forma holdco cash significantly above its target, provides the company with considerable financial flexibility. This strong capital base could be leveraged in several ways to benefit shareholders:

1. Increased shareholder returns: The excess capital could be used to fund share buybacks or increase dividend payments, directly enhancing shareholder value.

2. Strategic acquisitions: The company could pursue accretive acquisitions to expand its market presence or diversify its product offerings, potentially driving long-term growth.

3. Investment in innovation: Additional capital could be allocated to developing new products or enhancing existing ones, helping Equitable Holdings maintain its competitive edge in the rapidly evolving financial services landscape.

4. Debt reduction: The company could choose to pay down debt, improving its financial ratios and potentially leading to lower borrowing costs in the future.

What potential growth opportunities exist for EQH in the expanding RILA market?

Equitable Holdings’ leadership position in the fast-growing RILA market presents significant growth opportunities:

1. Market expansion: As more consumers seek retirement solutions that offer both growth potential and downside protection, the RILA market is expected to continue its rapid expansion. Equitable Holdings is well-positioned to capture a significant share of this growth.

2. Product innovation: The company’s expertise in RILA products allows it to develop new and innovative offerings that cater to evolving consumer needs, potentially expanding its customer base and increasing market share.

3. Cross-selling opportunities: Equitable Holdings can leverage its strong position in the RILA market to cross-sell other financial products and services, enhancing customer retention and lifetime value.

4. Demographic tailwinds: The aging population and increasing focus on retirement planning provide a favorable long-term backdrop for RILA products, supporting sustained growth in this segment.

SWOT Analysis

Strengths:

• Strong capital position with significant holdco cash above target levels
• Leadership in the rapidly growing RILA market
• Diverse product offerings across retirement, protection, and investment needs
• Strategic focus on capital-light products with high internal rates of return

Weaknesses:

• Recent underperformance in the Protection Solutions segment due to mortality challenges
• Higher expenses in Individual Retirement and Legacy segments
• Earnings growth projected to be on the lower end of guidance range

Opportunities:

• Anticipated capital infusion from the sale of the Protection business
• Favorable demographic trends supporting long-term demand for retirement products
• Potential for strategic acquisitions or product innovations
• Increasing consumer demand for equity exposure with downside protection

Threats:

• Market volatility impacting investor demand for annuities and investment products
• Potential regulatory changes affecting product offerings or profitability
• Ongoing mortality risks in the remaining Protection business
• Competitive pressures in the financial services industry

Analysts Targets

• BMO Capital Markets: Overweight (April 30th, 2025)
• Barclays (LON:BARC): Suspended (February 25th, 2025)
• Barclays: Overweight, $61.00 price target (February 7th, 2025)
• Deutsche Bank (ETR:DBKGn): Buy, $58.00 price target (January 10th, 2025)
• Barclays: Overweight, $60.00 price target (November 6th, 2024)

This analysis is based on information available up to May 25th, 2025, and reflects the most recent analyst reports and company disclosures available at that time.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on EQH. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore EQH’s full potential at InvestingPro.

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