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Genworth (GNW) Up 20.7% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Genworth Financial Inc. (GNW - Free Report) . Shares have added about 20.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Genworth Financial Incurs Q4 Loss, Lags Revenues
Genworth reported fourth-quarter 2016 net operating loss of $0.27 per share. The Zacks Consensus Estimate was of net operating income of $0.21 per share. The quarterly loss was also wider than a loss of $0. 17 per share incurred in the prior-year quarter.
The company reported net loss per share of $0.25 per share, substantially wider than the net loss per share of $0.59 per share in the prior-year quarter.
Operational Performance
Total revenue of Genworth dipped approximately 0.7% year over year to $2.157 billion. Decrease of 2.2% in premiums was responsible for the downside. However, a 0.6% improvement in net investment income and a 2.7% increase in policy fees and other income limited the downside. Also, the top line missed the Zacks Consensus Estimate of $2.180 billion.
Total benefits and expenses declined 4.4% year over year to $2.3 billion, primarily due to a fall in interest credited, lower acquisition and operating expenses, amortization of deferred acquisition costs and intangibles and decrease in interest expenses.
2016 Highlights
Operating loss of $0.63 per share compared unfavorably with adjusted operating income of $0.51 per share in 2015. Operating revenues of $8.3 billion declined 3.5% from 2015.
Segment-Wise Quarterly Review
U.S. Mortgage Insurance: Net operating income of $61 million surged 48.8% year over year. The loss ratio for the quarter improved 1100 basis points (bps) year over year to 28%. Continued decline and improved performance in delinquencies during the 2005–2008 book years led to the improvement.
Canada Mortgage Insurance: Net operating income was $39 million, down 5.4% year over year. The loss ratio in the quarter improved 500 bps year over year to 24%, mainly due to an increase in new delinquencies, net of cures.
Australia Mortgage Insurance: Net operating income of $14 million plunged 36.4% year over year. Loss ratio in the quarter was 30%, up 1300 bps year over year. This was attributable to continued unfavorable experience from the commodity dependent regions of Queensland and Western Australia.
U.S. Life Insurance: Net operating loss of $154 million was wider than net operating loss of $135 million in the prior-year quarter. The underperformance stemmed from the net operating loss incurred by Long Term Care Insurance.
Runoff: Net operating income of $6 million compared favorably with the net operating loss of $4 million in the year-ago quarter.
Corporate And Other: Net operating loss of $103 million was significantly wider than the year-ago loss of $58 million. Financial Update
Genworth exited the quarter with cash, cash equivalents and invested assets of $75 billion, down about 1% from year-end 2015.
Long-term borrowings of Genworth totaled $4.2 billion as of Dec 31, 2016, down approximately 8.2% from year-end 2015.
Book value per share as of Dec 31, 2016 was $25.37, down 1.5% from the 2015-end level.
Business Update
In Oct 2016, Genworth Financial inked a definitive agreement with China Oceanwide Holdings Group Co., Ltd. to be acquired by the latter for $2.7 billion or $5.43 per share in cash. The transaction will be executed via Asia Pacific Global Capital Co. Ltd., one of China Oceanwide's investment platforms. The deal is expected to culminate by the middle of 2017 upon fulfillment of closing conditions.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions. In the past month, the consensus estimate has shifted downward by 13.16% due to these changes.
At this time, Genworth's stock has a poor Growth Score of 'F', however its momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile 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.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
The stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.
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Genworth (GNW) Up 20.7% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Genworth Financial Inc. (GNW - Free Report) . Shares have added about 20.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Genworth Financial Incurs Q4 Loss, Lags Revenues
Genworth reported fourth-quarter 2016 net operating loss of $0.27 per share. The Zacks Consensus Estimate was of net operating income of $0.21 per share. The quarterly loss was also wider than a loss of $0. 17 per share incurred in the prior-year quarter.
The company reported net loss per share of $0.25 per share, substantially wider than the net loss per share of $0.59 per share in the prior-year quarter.
Operational Performance
Total revenue of Genworth dipped approximately 0.7% year over year to $2.157 billion. Decrease of 2.2% in premiums was responsible for the downside. However, a 0.6% improvement in net investment income and a 2.7% increase in policy fees and other income limited the downside. Also, the top line missed the Zacks Consensus Estimate of $2.180 billion.
Total benefits and expenses declined 4.4% year over year to $2.3 billion, primarily due to a fall in interest credited, lower acquisition and operating expenses, amortization of deferred acquisition costs and intangibles and decrease in interest expenses.
2016 Highlights
Operating loss of $0.63 per share compared unfavorably with adjusted operating income of $0.51 per share in 2015. Operating revenues of $8.3 billion declined 3.5% from 2015.
Segment-Wise Quarterly Review
U.S. Mortgage Insurance: Net operating income of $61 million surged 48.8% year over year. The loss ratio for the quarter improved 1100 basis points (bps) year over year to 28%. Continued decline and improved performance in delinquencies during the 2005–2008 book years led to the improvement.
Canada Mortgage Insurance: Net operating income was $39 million, down 5.4% year over year. The loss ratio in the quarter improved 500 bps year over year to 24%, mainly due to an increase in new delinquencies, net of cures.
Australia Mortgage Insurance: Net operating income of $14 million plunged 36.4% year over year. Loss ratio in the quarter was 30%, up 1300 bps year over year. This was attributable to continued unfavorable experience from the commodity dependent regions of Queensland and Western Australia.
U.S. Life Insurance: Net operating loss of $154 million was wider than net operating loss of $135 million in the prior-year quarter. The underperformance stemmed from the net operating loss incurred by Long Term Care Insurance.
Runoff: Net operating income of $6 million compared favorably with the net operating loss of $4 million in the year-ago quarter.
Corporate And Other: Net operating loss of $103 million was significantly wider than the year-ago loss of $58 million.
Financial Update
Genworth exited the quarter with cash, cash equivalents and invested assets of $75 billion, down about 1% from year-end 2015.
Long-term borrowings of Genworth totaled $4.2 billion as of Dec 31, 2016, down approximately 8.2% from year-end 2015.
Book value per share as of Dec 31, 2016 was $25.37, down 1.5% from the 2015-end level.
Business Update
In Oct 2016, Genworth Financial inked a definitive agreement with China Oceanwide Holdings Group Co., Ltd. to be acquired by the latter for $2.7 billion or $5.43 per share in cash. The transaction will be executed via Asia Pacific Global Capital Co. Ltd., one of China Oceanwide's investment platforms. The deal is expected to culminate by the middle of 2017 upon fulfillment of closing conditions.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions. In the past month, the consensus estimate has shifted downward by 13.16% due to these changes.
Genworth Financial Inc Price and Consensus
Genworth Financial Inc Price and Consensus | Genworth Financial Inc Quote
VGM Scores
At this time, Genworth's stock has a poor Growth Score of 'F', however its momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile 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.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
The stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.