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Headlines
- MetLife's stock performance is trailing the S&P 500 in YTD returns.
- The stock has seen a significant rise since early 2021 but with inconsistent annual returns.
- Recent financial performance shows an increase in revenues and adjusted net income, with future projections remaining optimistic.
MetLife’s stock (NYSE:MET) has increased by 6% YTD, compared to the S&P 500’s 10% rise over the same period. MetLife's peer, Prudential Financial (NYSE:PRU), has risen by 5% YTD. Currently priced at $69 per share, MET is trading 19% below its estimated fair value of $85, according to Trefis' valuation.
Since early January 2021, MET stock has surged by 75%, from $40 to approximately $70, while the S&P 500 has risen by about 40% over the same period. The growth in MET stock, however, has been uneven. Annual returns were 37% in 2021, 19% in 2022, and -5% in 2023. In comparison, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023, indicating MET's underperformance in 2023. Achieving consistent outperformance against the S&P 500 has been challenging for individual stocks, even for significant players in the Financials sector like JPMorgan Chase, Visa, and Mastercard, and tech giants such as Google, Tesla, and Microsoft.
In contrast, the Trefis High Quality (HQ) Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 over the same period, offering better returns with less risk. This performance underscores the HQ Portfolio's stability and lower volatility compared to the benchmark index.
Amidst the current uncertain macroeconomic environment with high oil prices and elevated interest rates, questions arise about whether MET will face a similar underperformance as it did in 2023 or experience a strong surge in the next 12 months.
In the second quarter of FY 2024, MetLife outperformed consensus estimates. The company reported total GAAP revenues of $17.8 billion, a 7% increase year-over-year. This growth was driven by a reduction in net investment losses from $1.04 billion to $421 million and a decrease in net derivative losses from around $1 billion to $508 million. Although premiums were slightly lower than the previous year, net investment income showed a modest increase. Additionally, total expenses as a percentage of revenues decreased, resulting in an adjusted net income of $912 million compared to $370 million.
For the first two quarters of FY 2024, the company’s revenues grew by 6% year-over-year to $33.9 billion, primarily due to lower net investment losses, which dropped from $1.7 billion to $796 million, a 10% rise in net investment income, and a 2% increase in premiums. Furthermore, total expenses as a percentage of revenues declined, leading to an adjusted net income of $1.7 billion, up from $384 million.
Looking ahead, third-quarter revenues are expected to follow a similar trend. Overall, MetLife's revenues are projected to remain around $71.42 billion in FY 2024. Additionally, the net income margin is likely to improve, resulting in an adjusted net income of $3.2 billion. With an annual GAAP EPS of $4.54 and a P/E multiple of just below 19x, this leads to a valuation of $85 per share.
