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Palomar (PLMR) Down 21.1% 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 21.1% 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, Revenues Beat Estimates

Palomar Holdings reported third-quarter 2021 operating income of 7 cents per share, missing the Zacks Consensus Estimate of 17 cents. The bottom line rebounded from the year-ago loss of 62 cents.

Palomar witnessed improved premiums and net investment income, partially offset by higher expenses.

Behind the Headlines

Total revenues improved 59% year over year to $68 million, mainly attributable to higher premiums, net investment income, and commission and other income. The top line beat the Zacks Consensus Estimate by 5%.

Gross written premiums increased 47.9% year over year to $152.3 million. Net written premiums jumped 53.5% year over year to $94.3 million.

Net investment income increased 4.6% year over year to $2.2 million, driven by a higher average balance of investments, partially offset by lower yields on invested assets.

Palomar witnessed an underwriting loss of $1.8 million, narrower than the year-ago loss of $24 million. Results were impacted by catastrophe losses from Hurricanes Ida and Nicholas as well as a single excess liability policy shock loss.

Total expenses of $67.5 million increased 1% year over year due to higher acquisition and underwriting expenses. Loss ratio improved 5370 basis points (bps) to 44.

Adjusted combined ratio, excluding catastrophe losses, deteriorated 430 bps year over year to 73.2.

Financial Update

Cash and cash equivalents increased 23.5% from the 2020-end level to $41.4 million at the end of third-quarter 2021.

Shareholder equity increased 3.9% from 2020 end to $377.8 million.

Annualized adjusted return on equity was 0.3% for the reported quarter against negative 17% in the year-ago quarter.

Guidance

Palomar estimates adjusted net income between $17 million and $18.5 million for the fourth quarter of 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -9.86% due to these changes.

VGM Scores

Currently, Palomar has a strong Growth Score of A, a grade with the same score on the momentum front. However, 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 B. 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.


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