Brighthouse Financial (BHF) Down 5.4% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Brighthouse Financial (BHF). Shares have lost about 5.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Brighthouse Financial due for a breakout? 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.

Brighthouse Financial Q1 Earnings Lag, Revenues Down Y/Y

Brighthouse Financial Inc.’s first-quarter 2019 adjusted net income of $1.98 per share missed the Zacks Consensus Estimate by 6.6%. The bottom line dropped 16.1% year over year.

The quarter incurred establishment costs related to planned technology and branding expenses associated with the company's separation from its parent company. Nonetheless, the company delivered robust annuity sales, favorable market conditions, and prudent capital and expense management.

Behind the Headlines

Total revenues of $691 million were down 61.9% year over year.
Premiums of $227 million decreased 0.9% year over year.

Adjusted net investment income was $811 million in the quarter under review, down 1.7% year over year. This downside was attributable to lower alternative investment income, partially offset by growth in average invested assets and the ongoing repositioning of the investment portfolio.  Investment income yield was 4.10%.

Corporate expenses of $225 million pretax decreased 3.7% year over year.
Total expenses decreased 14.7% year over year to $1.6 billion on lower interest credited to policyholder account balances, drop in amortization of DAC and VOBA and lower other expenses.

Quarterly Segment Update

Annuities reported adjusted operating income of $295 million, up 30.5% year over year reflecting lower amortization of deferred acquisition costs, lower reserves, and higher net investment income, driven primarily by positive market performance in the quarter, partially offset by lower fees. Annuity sales increased nearly 36% to $1.7 billion.

Life generated adjusted operating income of $25 million, down 62% year over year on higher claims and lower net investment income, partially offset by lower expenses. Life insurance sales were $1 million, down 50% year over year.

Adjusted operating loss of Run-off was $36 million against the year-ago profit of $50 million. The downside was due to lower net investment income and higher claims related to lower reinsurance recoveries.

Adjusted operating loss at Corporate & Other was $52 million, narrower than $59 million loss incurred in the year-ago quarter.

Financial Update

Cash and cash equivalents were $3.9 billion, up about 105% year over year.

Shareholders’ equity of about $15 billion at quarter-end increased 10.4% year over year.

Book value per share, excluding preferred stock and accumulated other comprehensive income, was $111.28 as of Mar 31, 2019, up 3.7% year over year.

Share Buyback Program

Brighthouse Financial bought back shares worth $52 million in the first quarter and another $14 million in April.
The board of directors approved a $400 million shares buyback program.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Brighthouse Financial has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Brighthouse Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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