Axis Capital Holdings (AXS Quick QuoteAXS - Free Report) is expected to witness an improvement in its top and bottom lines when it reports third-quarter 2024 results on Oct. 30, after the closing bell.

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The Zacks Consensus Estimate for AXS’ third-quarter revenues is pegged at $1.6 billion, indicating 5.8% growth from the year-ago reported figure.

The consensus estimate for earnings is pegged at $2.50 per share. The Zacks Consensus Estimate for AXS’ third-quarter earnings has moved up 8.2% in the past 30 days. The estimate suggests a year-over-year increase of 6.8%.

Image Source: Zacks Investment Research

AXS’ Solid Earnings Surprise History

Axis Capital’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 94.62%. This is depicted in the following chart.

Image Source: Zacks Investment Research

What the Zacks Model Unveils for Axis Capital 

Our proven model predicts an earnings beat for Axis Capital this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: AXS has an Earnings ESP of +2.87%. This is because the Most Accurate Estimate of $2.57 is pegged higher than the Zacks Consensus Estimate of $2.50.

Zacks Rank: AXS currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Likely to Shape AXS’ Q3 Results

Growth in North America pet insurance is expected to have aided the Accident and Health business. The property business is likely to have benefited from better-performing property, renewable energy onshore, construction and global property. Professional lines are likely to have benefited from growth in cyber reinsurance.

The Insurance segment of Axis Capital might have gained from increased new business opportunities, rate increases on renewal and continued strong retention. 

New business growth and increased rates across North America and Global Markets are likely to have driven the Reinsurance unit. 

Better performance in both segments likely is likely to have aided premiums in the to-be-reported quarter. 

A larger invested asset base, higher yield on a larger fixed income portfolio as well as positive returns from alternative assets are likely to have aided net investment income. 

Expenses are likely to have increased owing to higher net losses and loss expenses.

Technology investments that pave the way for efficient operations are likely to have provided an impetus to its margins. Continued expense discipline, increases in fees related to arrangements with strategic capital partners and net premiums earned are likely to have aided improvement in expense ratio. 

Share buybacks are likely to have provided an additional upside to the bottom line.

AXS’ Price Outperformance & Premium Valuation

The stock has outperformed the industry, sector and the Zacks S&P 500 composite index in the past three months of 2024. 
 

Image Source: Zacks Investment Research

The stock is trading at a price-to-book value of 1.33X, higher than the industry’s  1.63X. It is attractively valued compared with RenaissanceRe Holdings Ltd (RNR Quick QuoteRNR - Free Report) but is expensive compared with EverestGroup (EG Quick QuoteEG - Free Report) .

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Investment Thesis

Concentrating on accident and health, excess and supply property, casualty, credit and surety, and specialty reinsurance lines, increasing focus on growth areas, including wholesale insurance and lower middle markets, are likely to have driven growth at AXIS Capital.

AXIS Capital’s intention to expand digital capabilities to create new business growth in desirable smaller accounts bodes well for growth. This, coupled with a simplified operating structure, efficiencies and productivity gains, should help it achieve a general and administrative ratio of less than 11% by 2026.

What Should Investors Do Now With AXS Stock?

This leading specialty insurer and global reinsurer, which aims to lead in specialty risks, has been repositioning its portfolio and strengthening its book of businesses. It has been deploying resources prudently while enhancing efficiencies, improving its portfolio mix and improving underwriting profitability, which position Axis Capital for growth. It has a VGM Score of A.

Its dividend history is impressive, given that it has one of the highest dividend yields among its peers, making it an attractive pick for yield-seeking investors.

Though AXIS Capital’s debt has been decreasing over the last few years, with its debt-to-capital ratio improving, it compares unfavorably with the industry average. Also, its times interest earned, measuring the company’s debt servicing capabilities, compares unfavorably with the industry.  Increased competition faced by AXS could result in fewer submissions, lower premium rates, less favorable policy terms and conditions and greater costs of customer acquisition and retention.

Thus, investors who own this stock should retain it, while others can wait for some time before taking a plunge.