Meadowbrook Insurance Group, Inc.

Meadowbrook Insurance Group, Inc. ( MIG - Snapshot Report ) kept its solid momentum going and delivered third quarter EPS of 28 cents, 17% higher than the Zacks Consensus Estimate. This marked the company's 9th positive earnings surprise in the last 10 quarters.

Management has been bullish recently. The company raised its guidance for the remainder of 2010 following the strong third quarter. It has also been buying back shares in droves this year and recently hiked its quarterly dividend.

EPS Increase 47%

Third quarter earnings per share for 2010 came in at 28 cents, beating the Zacks Consensus Estimate by 4 cents. It was a 47% increase over the same quarter in 2009.

Total revenue was up 22% year-over-year, driven in large part by an 8.0% increase in gross written premiums.

Selling, general, and administrative expenses dropped 29% as the company was able to leverage its fixed costs. Meanwhile, net operating income grew a stellar 25%.

Guidance Raised

The company raised guidance for both 2010 and 2011 following the strong third quarter. Management expects 2010 EPS between $1.03 to $1.05 per share, up from previous guidance of $0.90 to $1.00.

The Zacks Consensus Estimate is right in the middle of guidance at $1.04.

The company expects 2011 EPS between $1.00 and $1.10. The Zacks Consensus Estimate is again right in the middle at $1.05.

Meadowbrook has beaten the Zacks Consensus Estimate in 9 of the last 10 quarters, as seen in the Price & EPS Surprise chart:

It is a Zacks #2 Rank (Buy) stock.

Rewarding Shareholders

Meadowbrook repurchased approximately 323,000 shares in the quarter and has spent over $20 million total year-to-date buying back about 2.5 million shares. There is an additional 2.5 million shares left under its current Share Repurchase Plan.

The company also recently hiked its quarterly dividend from 3 cent per share to 4 cents. It currently yields 1.6%

Valuation

Valuation still looks attractive for this specialty insurance company. The forward P/E is just 9.4x, a discount to the industry average of 11.9x. It is also trading below book value at 0.9x.

Read the September 8 article here.

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Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.