MetLife (NYSE: MET) stock has gained 6% year-to-date, compared to the S&P500 index’s 10% rise over the same period. In particular, MetLife’s competitor Prudential Financial (NYSE: PRU) has risen 5% year-to-date. Overall, MET’s current price of $69 per share is trading 19% below its fair value of $85 – Trefis’ estimate for The valuation of MetLife.

Against the background of the current financial situation MET stock has seen extremely strong gains of 75% from $40 in early January 2021 to around $70 now, compared to a rise of about 40% for the S&P 500 over that roughly 3-year period. However, MET stock’s rise has been far from consistent. The stock’s returns were 37% in 2021, 19% in 2022, and -5% in 2023. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022, and 24% in 2023 – suggesting that MET lagged behind the S&P in 2023. In fact consistently beats the S&P 500 – in good times and bad – has been difficult for individual stocks in recent years; for heavyweights in the financial sector such as JPM, V and MA and even for megacap stars GOOG, TSLA and MSFT. In contrast, the Trefis High Quality Portfolio with a collection of 30 stocks outperformed the S&P 500 every year in the same period. Why is that? As a group, the HQ Portfolio stocks delivered better returns with less risk compared to the benchmark index; less of a rollercoaster ride as shown by the HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could MET experience a similar situation as in 2023 and perform worse than the S&P in the next 12 months – or will there be a sharp jump?

The insurance giant beat consensus estimates in the second quarter of fiscal 2024. It reported total GAAP revenue of $17.8 billion – up 7% year over year, mainly due to a decline in net investment losses from $1.04 billion to $421 million and a reduction in net derivatives losses from around $1 billion to $508 million. Notably, premium numbers were slightly lower than the year-ago period, while net investment income grew slightly. On the expense side, total expenses as a percentage of revenue saw a favorable decline in the quarter, resulting in adjusted net income of $912 million versus $370 million.

The company’s revenue increased 6% year over year to $33.9 billion in the first two quarters of fiscal 2024. This was primarily due to lower net investment losses – down $1.7 billion to $796 million, a 10% increase in net investment income and a 2% increase in premiums. In addition, total expenses as a percentage of revenue decreased over the same period. Overall, adjusted net income was $1.7 billion (compared to $384 million).

We expect sales of a similar magnitude for the third quarter. Overall MetLife revenue are expected to be around $71.42 billion in fiscal 2024. In addition, net profit margin is likely to improve during the year, resulting in adjusted net income of $3.2 billion. Combined with annual GAAP EPS of $4.54 and a P/E ratio of just under 19, this results in a valuation of $85.

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