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Palomar (PLMR) Up 17.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Palomar (PLMR - Free Report) . Shares have added about 17.1% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Palomar Q2 Earnings Beat, Revenues Miss Estimates

Palomar Holdings reported second-quarter 2022 operating income of 73 cents per share, beating the Zacks Consensus Estimate by 10.6%. The bottom line increased 43% year over year.

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

Behind the Headlines

Total revenues improved 47% year over year to $84.4 million, mainly attributable to higher premiums and net investment income. The top line missed the Zacks Consensus Estimate by 3.3%.

Gross written premiums increased 69.1% year over year to $218.7 million. Net earned premiums surged 48% year over year to $80.3 million.

Net investment income increased 43.1% year over year to $3.1 million, driven by a higher average balance of investments.

Palomar witnessed an underwriting income of $20 million, up 53.9% year over year.

Total expenses of $61.4 million increased 45.4% year over year due to higher losses and loss adjustment expenses, acquisition and underwriting expenses as well as interest expenses. The loss ratio was 17.9, down 460 bps year over year.

Adjusted combined ratio, excluding catastrophe losses, improved 470 basis points (bps) year over year to 69.1.

Financial Update

Cash and cash equivalents decreased 27.5% from the 2021-end level to $36.5 million at the quarter end.

Shareholder equity decreased 4.1% from 2021 end to $378.1 million.

Annualized adjusted return on equity was 19.7%, expanding 560 bps year over year.

PLMR bought back 0.1 million shares for $7.3 million in the second quarter of 2022. As of Jun 30 2022, $79.7 million remains under authorization.

2022 Guidance Reiterated

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 an upward trend in estimates revision.

VGM Scores

At this time, Palomar has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Palomar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Palomar is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Markel (MKL - Free Report) , a stock from the same industry, has gained 1.4%. The company reported its results for the quarter ended June 2022 more than a month ago.

Markel reported revenues of $3.35 billion in the last reported quarter, representing a year-over-year change of +18.4%. EPS of $13.78 for the same period compares with $19.14 a year ago.

For the current quarter, Markel is expected to post earnings of $17.66 per share, indicating a change of +28.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -10.6% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Markel. Also, the stock has a VGM Score of C.


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