It has been about a month since the last earnings report for AmTrust Financial Services, Inc. . Shares have added about 3.7% 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 catalysts.
AmTrust Financial Q1 Earnings Miss, Revenues Beat
AmTrust Financial Services reported first-quarter 2017 operating net earnings of $0.32 per share, which missed the Zacks Consensus Estimate of $0.64 by 50%. Also, the bottom line plunged 53.6% from the year-ago quarter.
Higher catastrophe losses in the personal lines business of Republic Companies (included in the Small Commercial Business segment), prior-year adverse development related to a discontinued general liability program in the Specialty Program segment, higher professional service fees and an increased effective tax rate, were primarily responsible for the deterioration.
Behind the First-Quarter Headlines
AmTrust Financial’s total revenue of $1.4 billion increased 13.6% from the year-ago quarter. Higher service and fee income as well as strong investment performance drove the upside. Moreover, the top line beat the Zacks Consensus Estimate.
Net investment income jumped 28.1% from the prior-year quarter to $63.3 million.
Total expenses increased 19.2% year over year to $1.3 billion. Higher loss and loss adjusted expenses (LAE), acquisition costs and other underwriting expenses as well as other expenses resulted in the increase of total expenses.
Combined ratio deteriorated 370 basis points (bps) from the year-ago quarter to 95.6%. Expense ratio also deteriorated 160 bps to 26.9%.
Financial Update
At the end of the first quarter, AmTrust Financial had cash, cash equivalents and investments of $9.8 billion, up 6.4% from $9.2 billion at year-end 2016. Total assets grew 5.8% to $23.9 billion from $22.6 billion at year-end 2016. Shareholder equity inched up 0.8% to $3.3 billion from the 2016-end level.
The long-term debt-to-capitalization ratio of AmTrust Financial was 28.6%, reflecting a deterioration of 90 bps from Dec 31, 2016.
Additionally, book value per share grew to $13.91 as of Mar 31, 2017 from $13.81 as of Dec 31, 2016. Operating return on equity deteriorated to 9.4% from 21.6% from the prior-year quarter.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter. In the past month, the consensus estimate has shifted down by 11.1% due to these changes.
AmTrust Financial Services, Inc. Price and Consensus
VGM Scores
At this time, the stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with an 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. 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 growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that 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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AmTrust Financial Services (AFSI) Up 3.7% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for AmTrust Financial Services, Inc. . Shares have added about 3.7% 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 catalysts.
AmTrust Financial Q1 Earnings Miss, Revenues Beat
AmTrust Financial Services reported first-quarter 2017 operating net earnings of $0.32 per share, which missed the Zacks Consensus Estimate of $0.64 by 50%. Also, the bottom line plunged 53.6% from the year-ago quarter.
Higher catastrophe losses in the personal lines business of Republic Companies (included in the Small Commercial Business segment), prior-year adverse development related to a discontinued general liability program in the Specialty Program segment, higher professional service fees and an increased effective tax rate, were primarily responsible for the deterioration.
Behind the First-Quarter Headlines
AmTrust Financial’s total revenue of $1.4 billion increased 13.6% from the year-ago quarter. Higher service and fee income as well as strong investment performance drove the upside. Moreover, the top line beat the Zacks Consensus Estimate.
Net investment income jumped 28.1% from the prior-year quarter to $63.3 million.
Total expenses increased 19.2% year over year to $1.3 billion. Higher loss and loss adjusted expenses (LAE), acquisition costs and other underwriting expenses as well as other expenses resulted in the increase of total expenses.
Combined ratio deteriorated 370 basis points (bps) from the year-ago quarter to 95.6%. Expense ratio also deteriorated 160 bps to 26.9%.
Financial Update
At the end of the first quarter, AmTrust Financial had cash, cash equivalents and investments of $9.8 billion, up 6.4% from $9.2 billion at year-end 2016. Total assets grew 5.8% to $23.9 billion from $22.6 billion at year-end 2016. Shareholder equity inched up 0.8% to $3.3 billion from the 2016-end level.
The long-term debt-to-capitalization ratio of AmTrust Financial was 28.6%, reflecting a deterioration of 90 bps from Dec 31, 2016.
Additionally, book value per share grew to $13.91 as of Mar 31, 2017 from $13.81 as of Dec 31, 2016. Operating return on equity deteriorated to 9.4% from 21.6% from the prior-year quarter.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter. In the past month, the consensus estimate has shifted down by 11.1% due to these changes.
AmTrust Financial Services, Inc. Price and Consensus
AmTrust Financial Services, Inc. Price and Consensus | AmTrust Financial Services, Inc. Quote
VGM Scores
At this time, the stock has an average Growth Score of 'C', though it is lagging a bit on the momentum front with an 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. 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 growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.