Trailing The S&P Index By 30% YTD, Can MetLife Stock Recoup Its Losses?

+14.14%
Upside
68.94
Market
78.69
Trefis
MET: MetLife logo
MET
MetLife

MetLife’s stock (NYSE: MET) has lost 8% YTD as compared to the 24% rise in the S&P500 index over the same period. Further, at its current price of $66 per share, it is trading 14% below its fair value of $77 – Trefis’ estimate for MetLife’s valuation

Amid the current financial backdrop, MET stock has seen extremely strong gains of 45% from levels of $45 in early January 2021 to around $65 now, vs. an increase of about 25% for the S&P 500 over this roughly 3-year period. However, the increase in MET stock has been far from consistent. Returns for the stock were 33% in 2021, 16% in 2022, and -8% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 (YTD) – indicating that MET underperformed the S&P in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including V, JPM, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could MET face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

The insurance giant posted mixed results in the third quarter of 2023, with revenues beating the consensus but earnings missing expectations. It reported total revenues of $15.9 billion – down 29% y-o-y. This was mainly due to a 35% drop in the total premiums, followed by an increase in net derivative losses from -$226 million to -$1.2 billion. Notably, the premiums mainly suffered in the U.S. segment, partially offset by growth in Latin America and Middle East and Africa (EMEA) units. On the flip side, the top line was somewhat supported by a 35% rise in the net investment income. On the cost front, total expenses as a % of revenues witnessed an unfavorable increase, leading to an adjusted net income of $422 million – down 61% y-o-y.

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The company’s total revenues decreased 10% y-o-y to $47.9 billion in the first nine months of FY 2023. It was mainly due to an 18% drop in the premiums and higher net investment losses, partially offset by a 27% gain in the net investment income. Further, the firm reported a significant increase in the expense figure over the same period. It resulted in a 77% y-o-y reduction in the adjusted net income to $806 million. 

Moving forward, MetLife revenues are forecast to remain around $69.7 billion in FY2023. Further, the annual GAAP EPS is likely to touch $7.47. This coupled with a P/E multiple of just above 10x will lead to a valuation of $77.

 Returns Dec 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 MET Return 4% -8% 35%
 S&P 500 Return 4% 24% 113%
 Trefis Reinforced Value Portfolio 8% 38% 609%

[1] Month-to-date and year-to-date as of 12/20/2023
[2] Cumulative total returns since the end of 2016

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