Today’s news:
• Equitable Holdings (EQH) reported preliminary first-quarter results; moves from Hold to Buy.
• Equitable’s subsidiary AllianceBernstein (AB) reported first-quarter results.
Equitable Holdings (EQH 16.42 – yield 4.1%) – reported preliminary first-quarter results after yesterday’s market close. The results are strong enough that they could enhance the share price today, which is why I’m sending you this information today, rather than waiting for tomorrow’s Weekly Update.
Management reported $12 billion of hedge gains, well in excess of their $10 billion economic liability. Both the risk-based capital ratio (RBC ratio) and liquidity came in significantly above targeted numbers. Long-term interest rate assumptions were lowered from 3.45% to 2.25%, resulting in a GAAP charge of $1.9 billion, which does not harm book value. (Equitable’s industry peers will also be lowering interest rate assumptions due to changes within fixed income markets.) The company continues to pay an attractive dividend yield and repurchase shares, and maintains their previously-announced 50-60% targeted payout ratio.
Equitable owns two principal franchises: Equitable Life Insurance Co. and a majority stake in AllianceBernstein Holdings L.P. (AB), an investment management firm. AllianceBernstein reported impressive first-quarter results this morning that should boost investor enthusiasm for parent company Equitable Holdings. Adjusted earnings per share of $0.64 came in at the top of the consensus estimate range, and the reported $743.8 million net revenue exceeded all analysts’ estimates.
Consensus earnings estimates had recently been edging downward for Equitable, reflecting a 10% drop in EPS in 2020 and an 11% increase in 2021. Investors should expect analysts’ estimates to be revised upward in the coming days. The 2020 P/E is incredibly low at 3.8. Equitable will report final first-quarter results on the afternoon of May 7.
I’m moving EQH from Hold to a Buy recommendation. Wells Fargo raised their price target this morning from 21 to 23. EQH is appropriate for dividend investors, growth investors and traders. The stock has been trading between 14-17 for three weeks, and could easily begin a new run-up based on this good first-quarter news, in combination with this week’s bullish trend in the stock market. Buy.