Dropping 5% Since The Start Of 2023, Can MetLife Stock Rebound?

MetLife’s stock (NYSE: MET) has lost 5% since the start of 2023 as compared to the 26% rise in the S&P500 index over the same period. Further, at its current price of $69 per share, it is trading 12% below its fair value of $79 – Trefis’ estimate for MetLife’s valuation. 

Amid the current financial backdrop, MET stock has seen extremely strong gains of 55% from levels of $45 in early January 2021 to around $70 now, vs. an increase of about 30% for the S&P 500 over this roughly 3-year period. However, the increase in MET stock has been far from consistent. Returns for the stock were 33% in 2021, 16% in 2022, and -9% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that MET underperformed the S&P in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including V, JPM, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could MET face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

The insurance giant surpassed the revenue expectations in Q3 FY 2023, while earnings failed to meet the consensus. It reported total revenues of $15.9 billion, which was 29% below the year-ago period. It was primarily because of a 35% decrease in the total premiums figure, coupled with a jump in net derivative losses (from -$226 million to -$1.2 billion). That said, the negative impact was somewhat offset by a 35% growth in the net investment income. On the cost front, the expenses figure increased in the quarter, resulting in an adjusted net income of $422 million – down 61% y-o-y.

The company’s top line declined 10% y-o-y to $47.9 billion in the first three quarters of FY 2023. It was mainly due to lower premiums and an increase in net investment losses. Further, the total expenses as a % of revenues witnessed an unfavorable rise over the same period. Altogether, it resulted in a 77% y-o-y drop in the adjusted net income. 

Moving forward, we expect the same trend to continue in Q4 results. Further, Q4 consensus estimates for revenues and earnings are $18.46 billion and $1.90 respectively. Overall, MetLife revenues are estimated to remain around $71.36 billion in FY2023. Further, the annual GAAP EPS is likely to touch $7.42. This coupled with a P/E multiple of just below 11x will lead to a valuation of $79.

[1] Returns as of 1/22/2024
[2] Cumulative total returns since the end of 2016

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