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Palomar (PLMR) Down 4.6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Palomar (PLMR - Free Report) . Shares have lost about 4.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Palomar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Palomar Q3 Earnings Miss, Rise Y/Y, View Tightened

Palomar Holdings, Inc. reported third-quarter 2022 operating income of 29 cents per share, missing the Zacks Consensus Estimate by 51.7%. The bottom line increased more than fourfold year over year. Palomar witnessed improved premiums and net investment income, offset by higher losses and loss adjustment expenses.

Behind the Headlines

Total revenues improved 22.2% year over year to $83.1 million, mainly attributable to higher premiums and net investment income. The top line missed the Zacks Consensus Estimate by 13.5%. Gross written premiums increased 66.2% year over year to $253.1 million. Net earned premiums surged 20.4% year over year to $77.9 million.

Net investment income increased 67.4% year over year to $3.7 million, driven by a higher average balance of investments. Palomar witnessed an underwriting income of $4.1 million, rebounding from the year-ago loss of $1.8 million. Adjusted underwriting income was $7.5 million, rebounding from the year-ago loss of $0.2 million.

Total expenses of $75.5 million increased 11.8% year over year due to higher losses and loss adjustment expenses, acquisition and underwriting expenses as well as interest expenses. The loss ratio was 39.6, up 440 bps year over year. Adjusted combined ratio, excluding catastrophe losses, improved 990 basis points (bps) year over year to 90.3.

Financial Update

Cash and cash equivalents decreased 41.3% from the 2021-end level to $29.5 million at quarter end. Shareholder equity decreased 6.7% from 2021 end to $367.8 million.

Annualized adjusted return on equity was 7.9%, expanding 610 bps year over year.
PLMR bought back shares worth $3 million in the third quarter of 2022. As of Sep 30 2022, $76.7 million remains under authorization.

2022 Guidance Tightened

Palomar estimates adjusted net income between $82 million and $85 million compared with $80 million to $85 million guided earlier.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -10.78% due to these changes.

VGM Scores

Currently, Palomar has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Palomar has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Palomar belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Axis Capital (AXS - Free Report) , has gained 5.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Axis Capital reported revenues of $1.08 billion in the last reported quarter, representing a year-over-year change of -18.5%. EPS of $0.03 for the same period compares with $0.01 a year ago.

Axis Capital is expected to post earnings of $1.63 per share for the current quarter, representing a year-over-year change of -23.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Axis Capital. Also, the stock has a VGM Score of A.


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