Equitable Holdings, Inc. (EQH) is a holding company for a diversified financial services organization. The company operates through four segments: Individual Retirement; Group Retirement; Investment Management and Research; and Protection Solutions. The Individual Retirement segment is a provider of variable annuity products. The Group Retirement segment offers tax-deferred investment and retirement services or products to plans sponsored by educational entities, municipalities, and not-for-profit entities. The Investment Management and Research segment provide diversified investment management, research, and related services. The Protection Solutions segment focuses on its life insurance products.
Last week’s consumer price index data revealed that inflation had risen 8.6% in May from the year-ago period, the highest since December 1981. The Federal Reserve has been trying to combat the surging inflation by raising interest rates. Since the beginning of the year, the Fed has increased the benchmark interest rates thrice, with a 75-basis point increase yesterday, which happens to be the most aggressive rate hike since 1994. A rising interest rate environment usually bodes well for insurance companies, enabling them to generate better revenues. Higher bond yields increase the risk-free returns of insurance companies as they invest in high-grade fixed income instruments to meet their promised returns to policyholders.
However, in the last reported quarter, EQH’s EPS came in at $1.36, missing the consensus estimate of $1.51. Moreover, analysts expect EQH’s EPS and revenue to decline in fiscal 2022.
EQH’s stock has declined 18.6% in price year-to-date and 16.4% over the past year to close the last trading session at $26.67. It is currently trading 28.1% below its 52-week high of $37.13, which it hit on February 10, 2022.
Here’s what could influence the performance of EQH in the upcoming months:
Mixed Financials
EQH’s total revenues increased 242% year-over-year to $3.94 billion for the first quarter ended March 31, 2022. The company’s non-GAAP operating earnings declined 8.6% year-over-year to $548 million. Also, its total assets declined 5% to $277.65 billion, compared to $292.26 billion for the fiscal year ended December 31, 2021. In addition, its net income available to its common shareholders increased 137.2% year-over-year to $559 million.
Unfavorable Analyst Estimates
Analysts expect EQH’s EPS and revenue for fiscal 2022 to decline 9% and 1.4% year-over-year to $5.99 and $14.30 billion, respectively.
Mixed Profitability
In terms of trailing-12-month gross profit margin, EQH’s 43.35% is 32.7% lower than the 64.46% industry average. However, its 33.62% trailing-12-month EBITDA margin is 45% higher than the industry average of 23.18%. Furthermore, the stock’s 0.06% trailing-12-month asset turnover ratio is 72% lower than the industry average of 0.21%.
POWR Ratings Reflect Uncertainty
EQH has an overall rating of C, equating to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. EQH has a D grade for Sentiment, in sync with unfavorable analyst estimates.
The stock has a C grade for Quality, consistent with its mixed profitability.
EQH is ranked #21 out of 27 stocks in the Insurance - Life industry. Click here to access EQH’s Growth, Value, Momentum, and Stability ratings.
Bottom Line
Although the rise in interest rates bodes well for insurers, EQH’s EPS and revenue are expected to decline in fiscal 2022. Moreover, the stock is currently trading below its 50-day and 200-day moving averages of $29.41 and $31.67, respectively, indicating a downtrend. So, it could be wise to wait for a better entry point in the stock.
How Does Equitable Holdings, Inc. (EQH) Stack Up Against its Peers?
While EQH has an overall POWR Rating of C, you might want to consider investing in the following Insurance - Life stocks with a B (Buy) rating: Security National Financial Corporation (SNFCA) and China Life Insurance Company Limited (LFC).
EQH shares were trading at $25.51 per share on Thursday afternoon, down $1.16 (-4.35%). Year-to-date, EQH has declined -21.23%, versus a -22.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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