EQH: Bearish Signal - Time for a Put Option?

Equitable is a financial services company operating through three primary business lines: retirement, asset management, and affiliated distribution. The 'Equitable' franchise provides retirement and protection strategies, while 'AllianceBernstein' ('AB') offers diversified investment services to institutional investors, individuals, and private wealth clients. 'Equitable Advisors' provides financial planning, wealth management, and risk management services. The company operates through six segments including Individual Retirement, Group Retirement, Asset Management, Protection Solutions, Wealth Management, and Legacy. Distribution occurs through 'Equitable Advisors', Bernstein Financial Advisors, and third-party agreements with banks, broker-dealers, and insurance carriers. 'AB' distributes through Institutional, Retail and Private Wealth Management channels. Equitable aims to be a trusted service provider through advice, products, and services, focusing on building trust through financial strength and service quality.

The presence of an upcoming earnings report for Equitable Holdings (EQH) within the next 1-2 weeks suggests a potentially volatile period. While the provided news article offers no specific details, the anticipation surrounding earnings releases often leads to increased trading activity. Without further information on expected performance or market sentiment, it's difficult to predict the directional impact with certainty. However, earnings reports are typically significant catalysts. Given the lack of macro news and specific details from the stock news, a neutral baseline score of 0.50 is adjusted slightly upwards to 0.55 to reflect the inherent uncertainty and potential for movement associated with an impending earnings announcement. Option traders should be prepared for potential price swings in either direction, depending on the content of the earnings report and the market's reaction to it. Consider employing strategies that can profit from volatility, irrespective of direction.

EQH's technical outlook is decidedly bearish. The stock price has experienced a significant downtrend over the past 90 days, falling from highs near $56 in late June to its current level around $48.86. It is trading below its 21-day EMA ($49.12) and 50-day SMA ($51.20), and also below the 200-day SMA ($51.85), which confirms a bearish trend across short, medium and long-term time horizons. Momentum indicators also signal weakness; the MACD is negative (-0.718) and trending further below its signal line (-0.925), while the RSI is at 46.03, indicating oversold conditions are not yet in effect, and further declines are possible. The Stochastic Oscillator (59.10) has not risen into overbought territory, suggesting that the downward momentum may persist. The ADX is at 19.76, indicating a moderate trend strength. Recent price action confirms the bearish outlook, with successive lower highs and lower lows. Given these factors, the probability of continued downward movement in the next 1-3 months is high.

Equitable Holdings' MD&A reveals a challenging financial landscape. For the three months ended June 30, 2025, the company reported a `Net income (loss) attributable to Holdings` of -$349 million, a significant decrease from $428 million in the prior year. This downturn was primarily driven by a $1.2 billion increase in 'net derivative losses' and a $120 million increase in 'policyholders’ benefits'. For the six months ended June 30, 2025, `Net income (loss) attributable to Holdings` was -$286 million, down from $520 million in 2024, with a $1.3 billion increase in market risk benefits being a key driver. The `Net cash (used in) provided by operating activities` is not explicitly stated, but the document does specify that the Company has sufficient cash flows from operations to satisfy liquidity requirements in 2025. The company acknowledges that its business is significantly affected by 'economic conditions and consumer confidence, conditions in the global capital markets and the interest rate environment', and that 'the potential for increased volatility could pressure sales and reduce demand for our products'. Non-GAAP Operating Earnings for the three and six months ended June 30, 2025 were $352 million and $773 million, respectively, down from $495 million and $972 million in the prior year periods. This suggests the underlying profitability, adjusted for market volatility, is also under pressure.

The Equitable Holdings' Q2 2025 earnings call presents a moderately bullish outlook. While non-GAAP operating earnings were down 23% year-over-year to $1.10 per share, adjusting for notable items, EPS was $1.41, down 8%. Management attributes this primarily to elevated individual life mortality claims. However, Mark Pearson stated that 'we see several positive leading indicators that suggest growth will accelerate in the second half of the year'. The company closed its Individual Life reinsurance transaction with RGA, freeing over $2 billion of capital and reducing earnings volatility. AUM reached a record $1.1 trillion, up 5% year-to-date. Retirement businesses generated $1.9 billion of net inflows, and Wealth Management saw $2 billion of advisory net inflows, with a trailing 12-month organic growth rate of 12%. AB experienced net outflows of $6.7 billion, but returned to net inflow in June. The company returned $318 million to shareholders, a 74% payout ratio. They expect $1.6 billion to $1.7 billion of organic cash generation in 2025 and plan at least $500 million of incremental share repurchases. Overall, despite a soft quarter, management is confident in achieving their 2027 financial targets, expecting EPS growth to accelerate.

EQH's financial performance presents a mixed but ultimately concerning picture. Revenue has fluctuated significantly, starting at $2.23B in Q1 2024, peaking at $4.576B in Q1 2025, and then decreasing to $2.362B in Q2 2025, indicating instability in top-line growth. Profitability has also been highly variable; the gross profit ratio started at 0.37 in Q1 2024, reached 1.59 in Q4 2024, but then plummeted to 0.74 in Q2 2025. Operating cash flow is only available for some quarters, but the latest available figure of $158M in Q1 2025 is a positive sign, although historical data shows this can fluctuate significantly. A significant concern is the increase in total debt from $5.401B in Q1 2024 to $4.332B in Q2 2025, indicating increased financial leverage. The net income also shows a concerning trend, with a net loss of $349M in Q2 2025. Overall, the volatile revenue, fluctuating profitability, and increasing debt suggest caution regarding EQH's financial health and trajectory.

The company presents a moderately bullish investment profile based on its key metrics and financial ratios. Revenue has shown positive growth, indicating a healthy demand for its products or services. The gross margin has remained relatively stable, suggesting efficient cost management. The Return on Equity (ROE) indicates a solid return for shareholders. The Price-to-Earnings (P/E) ratio suggests the company is appropriately valued by the market. The debt-to-equity ratio has seen a decrease, showcasing the company's improved financial leverage. The current ratio signifies the company's strong ability to meet its short-term obligations. Overall, the company demonstrates a stable and growing business model with a healthy balance sheet, making it a moderately attractive investment for the next 6-12 months.