On Aug 12, 2014, Fortegra Financial Corp. (FRF - Snapshot Report) scaled a 52-week high of $9.88 after posting mixed second-quarter results. On Aug 11, 2014, the company reported second-quarter earnings results that included a 33% positive earnings surprise.
In fact, shares of Fortegra Financial surged nearly 41% over the last trading session to close at $9.87, within a day of reporting its second-quarter results. Furthermore, the year-to-date return of the stock is 19.35%, much above the S&P 500’s return of 4.62% as well as that of other players in the insurance industry like Brown & Brown Inc. (BRO - Snapshot Report) and Arthur J Gallagher & Co. (AJG - Snapshot Report) that generated returns of –1.62% and –3.73%, respectively over the same period.
During the second quarter, Fortegra Financial’s top line surpassed our estimates and increased 5.2% year over year, reflecting organic growth and decline in member benefit claims, and net losses and loss adjustment expenses. Additionally, the company’s strong cost containment initiatives have helped in improving the adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margins during the quarter.
At second quarter end, Fortegra Financial’s cash position remained strong, which should help the company consolidate its inorganic growth going forward. Moreover, last week, credit rating agency A. M. Best upgraded Fortegra Financial’s insurance subsidiaries’ rating to “A-” (Excellent), based on improvement in operating results and balance sheet. This ratings upgrade marks the highest rating received by Fortegra Financial from A.M. Best.
Additionally, based on the impressive performance in the first half of 2014, Fortegra Financial’s management reiterated its 2014 EBITDA and net revenue growth guidance. We remain optimistic about the stock and have our earnings projection at 68 cents per share for full-year 2014, representing a year-over-year improvement of 19.3%. For full-year 2015, the Zacks Consensus Estimate is pegged at 71 cents per share, translating into a year-over-year improvement of 4.4%.
Yesterday, Fortegra Financial and Tiptree Financial Inc. entered into an agreement pursuant to which the former will be sold to the latter for $218 million.
Fortegra Financial currently caries a Zacks Rank #3 (Hold).