MetLife (NYSE: MET) is scheduled to report its fiscal Q2 2021 results on Thursday, August 5. We expect MetLife to beat the revenues and earnings consensus estimates. The company outperformed the expectations in the last quarter, despite lower revenues and earnings on a year-on-year basis. The top-line suffered due to the net derivative loss, which outshined the growth in premiums and net investment income. Similarly, the profitability figures were down due to the combined effect of higher expenses and net derivative losses. That said, we expect premiums and the net investment income to continue their growth momentum in the second quarter.
Our forecast indicates that MetLife’s valuation is around $71 per share, which is 23% above the current market price near $58. Look at our interactive dashboard analysis on MetLife’s pre-earnings: What To Expect in Q2? for more details.
(1) Revenues expected to top the consensus estimates in Q2
Trefis estimates MetLife’s fiscal Q2 2021 revenues to be around $16.25 billion, 3% above the $15.77 billion consensus estimate. It reported total revenues of $67.8 billion in 2020 – marginally below the year-ago period. The company derives close to 60% and 25% revenues from premiums and net investment income, respectively. While the premiums recorded a slight drop in 2020 due to the economic crisis, the net investment income declined 9% y-o-y. The net investment income was down because of the lower investment yields, which suffered due to the interest rate headwinds. That said, both the premiums and the investment income have seen some improvement in the first quarter of 2021. However, it was more than offset by the net derivative loss of -$2.2 billion, as compared to the gain of $4.2 billion in the year-ago period. We expect the growth in premiums and net investment income to drive the second-quarter results.
The investment yields are unlikely to recover to the pre-Covid-19 levels anytime soon. However, it will likely see some improvement in the year. This coupled with growth in the investable assets will boost the net investment income. Further, the premiums are expected to see some improvement, with recovery in the economy. Overall, the above factors will likely enable the revenues to touch $66.6 billion in FY2021. Our dashboard on MetLife’s revenues offers more details on the company’s segments.
2) EPS likely to beat the consensus estimates
MetLife’s Q2 2021 adjusted earnings per share (EPS) is expected to be $1.66 per Trefis analysis, almost 6% above the consensus estimate of $1.57. Its adjusted net income was down 9% y-o-y in 2020 due to a higher effective tax rate. Further, the company reported lower net income in the first quarter of 2021, also. The first-quarter figure was down due to lower revenues and higher expenses. That said, we expect the second-quarter results to see some improvement in the firm’s profitability figures.
MetLife’s adjusted net income margin is likely to improve in FY2021 and be around 8.6%. This will enable MET to report an EPS of around $6.58 in the current year.
(3) Stock price estimate 23% more than the current market price
Going by our MetLife’s valuation, with an EPS estimate of around $6.58 and a P/E multiple of just below 11x in fiscal 2021, this translates into a price of $71, which is 23% above the current market price of around $58.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
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