MetLife (MET) Up 12.5% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for MetLife (MET). Shares have added about 12.5% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is MetLife due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. MetLife Q3 Earnings Miss on Weak Group Benefits Unit & High CostsMetLife reported third-quarter 2024 adjusted operating earnings of $1.93 per share, which missed the Zacks Consensus Estimate by 10.7%. The bottom line declined 1% year over year.Adjusted operating revenues of $17.6 billion decreased 3.4% year over year. The top line missed the consensus mark by 4.7%.The weak quarterly results were impacted by an elevated expense level and segment-specific challenges like declining earnings in the RIS and Group Benefits segments due to lower recurring interest margins and less favorable outcomes in non-medical health underwriting, respectively. Favorable underwriting results in Aisa, coupled with higher net investment income, partially offset the negatives.Behind the HeadlinesAdjusted premiums, fees and other revenues (PFOs), excluding pension risk transfer (PRT), grew 2% year over year to $11.9 billion. Adjusted net investment income of $5.1 billion increased 2% year over year on the back of rising rates and growth in assets.Total expenses were $16.4 billion, up 7.3% year over year due to higher interest credited to policyholder account balances. The adjusted expense ratio, excluding total notable items related to adjusted other expenses and PRT, increased 10 basis points year over year to 20.7%.Net income more than doubled year over year to $1.3 billion. Adjusted return on equity, excluding accumulated other comprehensive income (loss) other than foreign currency translation adjustments, of 14.6% deteriorated 30 bps year over year.Inside MetLife’s SegmentsGroup Benefits: The segment recorded adjusted earnings of $373 million, which plunged 27% year over year and outpaced the Zacks Consensus Estimate of $454.4 million. Liability adjustment incorporated in the yearly actuarial assumption review, along with other insurance-related modifications, and less favorable outcomes in non-medical health underwriting impacted the metric. Adjusted PFOs advanced 5% year over year to $6.1 billion. RIS: Adjusted earnings in the segment rose 0.4% year over year to $472 million, which beat the consensus mark of $422.7 million. The metric benefited from the impacts of the annual actuarial assumption review and insurance adjustments, partially offset by a decline in the recurring interest margin. However, adjusted PFOs, excluding PRT, rose 3% year over year to $1.1 billion on the back of growing U.K. longevity reinsurance.Asia: The unit’s adjusted earnings were $306 million, which grew 11% year over year but missed the Zacks Consensus Estimate of $405.6 million. The metric was aided by favorable underwriting, partially offset by a reduced investment margin. However, adjusted PFOs of $1.7 billion fell 2% year over year.Latin America: The segment reported adjusted earnings of $221 million, which increased 11% year over year on the back of expanding volumes. The figure lagged the consensus mark of $232.1 million. Adjusted PFOs improved 1% year over year to $1.5 billion, attributable to solid sales and persistency rates.EMEA: In the third quarter, adjusted earnings of the segment declined 20% year over year to $70 million, higher than the Zacks Consensus Estimate of $66.2 million. The metric was impacted by the annual actuarial assumption review, while volume growth partially offset it. Adjusted PFOs of $655 million grew 11% year over year on the back of growing sales across the region.MetLife Holdings: The segment’s adjusted earnings plunged 13% year over year to $182 million and beat the consensus mark of $168.1 million. The decrease was due to a reinsurance transaction closed in 2023. Adjusted PFOs were $793 million, which slid 13% year over year.Corporate & Other: The unit incurred an adjusted loss of $249 million, narrower than the prior-year quarter’s loss of $262 million.Financial Update (As of Sept. 30, 2024)MetLife exited the third quarter with cash and cash equivalents of $14.9 billion, which declined 27.7% from the 2023-end level. Total assets of $652.1 billion fell 5.2% from the 2023-end figure.Long-term debt totaled $15.5 billion, which declined 0.5% from the figure as of Dec. 31, 2023. Short-term debt amounted to $161 million.Total equity of $25.9 billion tumbled 14.4% from the 2023-end level.Book value per share was $39.02 as of Sept. 30, 2024, up 33% year over year.Capital Deployment UpdateMetLife bought back shares worth $0.8 billion in the third quarter. It pursued additional repurchases of roughly $130 million in October 2024.2024 OutlookEarlier, management estimated a variable investment income of $1.5 billion for 2024. Corporate & Other adjusted losses are anticipated between $750 million and $850 million. The effective tax rate is projected to be 24-26%.MetLife Holdings segment’s adjusted PFOs are expected to witness a year-over-year decline of 13-15%. The unit’s adjusted earnings are forecast to be $700-$900 million.Adjusted earnings in the Asia segment are anticipated to grow 20%. Adjusted earnings in the EMEA unit are likely to be $60-$65 million for the remaining quarters of 2024.Near-Term TargetsOver the next three years, MetLife projects adjusted PFOs in the Group Benefits business to rise 4-6%. Adjusted PFOs in the MetLife Holdings segment are anticipated to increase 4-6% per year, whereas the same in the Latin America and EMEA units are forecast to witness high-single-digit and mid-single-digit growth, respectively. The Group Life mortality ratio is likely to be 84-89%.MetLife aims to achieve an adjusted return on equity of 13-15%. It expects to keep the free cash flow ratio at 65-75% of adjusted earnings. The direct expense ratio is targeted to be 12.3%.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in estimates revision.VGM ScoresAt this time, MetLife has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise MetLife has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.Performance of an Industry PlayerMetLife belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, The Hartford (HIG), has gained 12% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.The Hartford reported revenues of $4.67 billion in the last reported quarter, representing a year-over-year change of +10.9%. EPS of $2.53 for the same period compares with $2.29 a year ago.The Hartford is expected to post earnings of $2.69 per share for the current quarter, representing a year-over-year change of -12.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -2%.The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for The Hartford. Also, the stock has a VGM Score of B.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. 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