Equitable Holdings Declines 11% Despite Q2 Earnings Beat

Equitable Holdings, Inc. EQH shares fell 10.9% since it reported second-quarter 2024 results on Jul 30, 2024, after the closing bell. Its strong second-quarter earnings benefited on the back of higher AUM/A, growth in spread income and fee-based revenues.

Improved performance in Wealth Management and asset management were major tailwinds. However, the upside was partly offset by an elevated overall expense level.

EQH reported second-quarter 2024 adjusted earnings per share of $1.43, which outpaced the Zacks Consensus Estimate by 2.1%. The bottom line jumped from $1.17 per share a year ago.

Operating revenues of $3.6 billion improved 7.7% year over year in the second quarter but missed the consensus estimate by 4.4%.

Q2 Performance Details

Policy charges and fee income amounted to $617 million, which rose from $594 million a year ago. Premiums of $282 million increased by $2 million from the year-ago period. Net investment income of $1.17 billion climbed from $1.04 billion a year ago.

Total benefits and other deductions increased to $2.8 billion from $1.8 billion in the year-ago quarter. The year-over-year rise was due to higher compensation and benefits, commissions and distribution-related payments, partially offset by lower policyholders' benefits. A higher change in market risk benefits and purchased market risk benefits in the year-ago quarter lowered the year-ago total expenses.

Pre-tax income was at $681 million, up from $539 million in the year-ago period.

Total AUM was at $892.5 billion in the second quarter, up from $843.4 million a year ago. Total Assets Under Management/Administration or AUM/A jumped to $986 billion from $887 billion a year ago.

Q2 Segmental Update

Individual Retirement: Segment revenues were $810 million in the second quarter, up from $647 a year ago, but missing our estimate by 0.3%. The segment's pre-tax income rose to $274 million from $271 million a year ago.

Group Retirement: The unit recorded revenues of $283 million in the quarter under review, which grew from $267 million but missed the consensus estimate by 2.8%. Its pre-tax income rose to $145 million from $124 million a year ago.

Asset Management: The segment witnessed revenues of $1.05 billion in the quarter under review, which grew from $1 billion. The pre-tax income rose to $238 million from $203 million a year ago.

Protection Solutions: The unit recorded revenues of $834 million in the quarter under review, which grew from $784 million but missed the consensus estimate by 5.1%. Its pre-tax income jumped to $77 million from $29 million a year ago.

Wealth Management: Segment revenues were $442 million in the second quarter, up from $391 a year ago, and beat our estimate by 0.5%. The segment's pre-tax income rose to $61 million from $54 million a year ago.

Legacy: The segment witnessed revenues of $200 million in the quarter under review, which fell from $203 million. The pre-tax income fell to $48 million from $52 million a year ago.

Financial Update (as of Jun 30, 2024)

Equitable Holdings exited the second quarter with total investments and cash and cash equivalents of $117.4 billion, which rose from the 2023-end level of $110.4 billion. Total assets of $287.8 billion increased from the $276.8 billion figure at 2023 end.

Long-term debt amounted to $3.83 billion, up marginally from the 2023-end level of $3.82 billion.

Total equity of $1.6 billion fell from the $2.6 billion level at 2023 end.

Capital Returned

Equitable Holdings returned $325 million ($78 million cash dividend and $247 million repurchases) in the quarter under review. The company has a payout ratio target of 60-70% of non-GAAP operating earnings.

Future View

The company expects to reach $2 billion of annual cash generation by 2027. It expects a non-GAAP operating EPS CAGR of 12-15% through 2027.

Zacks Rank & Key Picks

EQH currently has a Zacks Rank #3 (Hold).

Investors interested in the broader Finance space may look at some better-ranked players like Jackson Financial Inc. JXN, WisdomTree, Inc. WT and HIVE Digital Technologies Ltd. HIVE. While Jackson Financial currently sports a Zacks Rank #1 (Strong Buy), WisdomTree and HIVE Digital carry a Zacks Rank #2 (Buy) each.

The Zacks Consensus Estimate for Jackson Financial's current-year earnings is pegged at $17.89 per share, which indicates 39.3% year-over-year growth. It witnessed one upward estimate revision in the past 30 days against no downward movement. The consensus mark for JXN's current year revenues suggests a 116.7% surge from a year ago.

The Zacks Consensus Estimate for WisdomTree's 2024 earnings indicates 64.9% year-over-year growth. During the past month, WT has witnessed three upward estimate revisions against none in the opposite direction. It beat earnings estimates twice in the past four quarters and met on the other occasions, with an average surprise of 5.9%.

The Zacks Consensus Estimate for HIVE Digital's current-year earnings suggests a 34.6% year-over-year improvement. During the past month, HIVE has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $127.2 million, indicating an 11.1% increase from a year ago.

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