On Wednesday, Jefferies made a bullish move on Lincoln National Corporation (NYSE:LNC), upgrading the stock from Hold to Buy and raising the price target to $34.00, up from the previous $26.00. The firm's revised outlook for the insurance company reflects a potential shift back to retail growth and an undervalued life insurance segment.
The upgrade comes after a reassessment of Lincoln National's position following capital and cash flow challenges that emerged in 2022. These issues had shifted the focus from growth to capital adequacy.
However, with the company's Risk-Based Capital (RBC) likely restored following a Wealth Management deal, and an affiliated reinsurance solution seemingly imminent, Jefferies anticipates a pivot back to growth.
The firm's analysis suggests that the market has not fully appreciated potential improvements in Lincoln National's free cash flow. Additionally, the valuation of the Life Insurance segment, currently implied as negative, is considered excessively pessimistic by Jefferies.
Jefferies' price target of $34.00 represents a roughly 25% price-to-earnings (P/E) discount compared to targets for peers such as EQH and CRBG.
This adjustment signals confidence in Lincoln National's recovery and a belief that the stock presents a compelling opportunity for investors interested in the firm's "Return of Retail" thesis.
Lincoln National's stock performance and future prospects are now under a more positive light, with Jefferies' upgrade reflecting a significant change in the investment narrative for the company, from concerns over capital adequacy to a renewed focus on retail growth potential.
InvestingPro Insights
Lincoln National Corporation (NYSE:LNC) has shown resilience and potential for growth, as reflected in recent analyst upgrades. According to InvestingPro data, LNC is currently trading at a low earnings multiple with a P/E Ratio of 4.14 and an adjusted P/E Ratio for the last twelve months as of Q1 2024 of 3.57. This indicates that the stock may be undervalued relative to its earnings, aligning with Jefferies' assessment of the life insurance segment.
Furthermore, the company has demonstrated a strong track record of returning value to shareholders, having maintained dividend payments for 54 consecutive years. The dividend yield as of April 2024 stands at a robust 5.87%, which is attractive for income-focused investors. Moreover, analysts have revised their earnings upwards for the upcoming period, suggesting confidence in the company’s ability to grow its net income this year.
For those seeking a deeper dive into the financial health and future prospects of Lincoln National, InvestingPro offers additional insights. There are 11 more InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/LNC. To enhance your investment research, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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