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Palomar (PLMR) Up 16.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Palomar (PLMR - Free Report) . Shares have added about 16.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Palomar due for a pullback? 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 drivers.

Palomar Q4 Earnings Top, Revenues Miss Estimates

Palomar Holdings, Inc. reported fourth-quarter 2021 operating income of 74 cents per share, beating the Zacks Consensus Estimate by 12.1%. The bottom line rebounded from the year-ago loss of 5 cents.

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

Behind the Headlines

Total revenues improved 69% year over year to $71 million, mainly attributable to higher premiums, net investment income, and commission and other income. The top line however missed the Zacks Consensus Estimate by 4.2%.

Gross written premiums increased 56% year over year to $149.9 million. Net earned premiums surged 74.3% year over year to $67.8 million.
Net investment income increased 4.6% year over year to $2.4 million, driven by a higher average balance of investments, partially offset by lower yields on invested assets.

Palomar witnessed an underwriting income of about $17 million, which marked a rebound from the year-ago loss of about $5 million.

Total expenses of $51.8 million increased 15.8% year over year due to higher acquisition and underwriting expenses as well as interest expenses. Loss ratio improved 2920 basis points (bps) to 15. Adjusted combined ratio, excluding catastrophe losses, improved 4030 bps year over year to 70.7.

Full-Year Update

Operating income of $2.05 per share beat the Zacks Consensus Estimate of $1.97. The bottom line increased nearly six-fold from 2020. Total revenues improved 47.6% year over year to $246.5 million but missed the Zacks Consensus Estimate of $250 million.

Gross written premiums increased 51% year over year to $535.2 million. Adjusted combined ratio of 76.1 improved 2430 bps year over year.

Financial Update

Cash and cash equivalents increased 49% from the 2020-end level to $50.4 million at the end of 2021. Shareholder equity increased 8.4% from 2020 end to $394.2 million. Annualized adjusted return on equity was 14.1%, expanding 1110 bps from 2020.

2022 Guidance

Palomar estimates adjusted net income between $80 million and $85 million in 2022.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -8.29% due to these changes.

VGM Scores

Currently, Palomar has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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. Notably, Palomar has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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