It has been about a month since the last earnings report for Markel Corporation (MKL - Free Report) . Shares have added about 1.1% 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.
Markel Q1 Earnings and Revenues Miss Estimates
Markel reported first-quarter 2017 net income of $2.82 per share, which missed the Zacks Consensus Estimate of $4.17 by 32.4%. Also, earnings plummeted 74.1% year over year.
The first-quarter results were adversely impacted by the decrease in the Ogden rate. However, the company’s underwriting results were in line with expectations. Return on investment portfolio drove growth in book value in the reported quarter. Markel Ventures operations continued to make positive contributions and the property and casualty (P&C) insurer expects the trend to continue.
Total operating revenue of $1.39 billion missed the Zacks Consensus Estimate of $1.44 billion. However, the top line improved 2.6% year over year on higher premiums, investment income as well as other revenues.
Total operating expenses of Markel Corp. increased 13.6% year over year to $1.3 billion.
Markel Corp.’s combined ratio deteriorated 1200 basis points (bps) year over year to 100% in the reported quarter.
U.S. Insurance: Net written premiums were down 1.4% year over year to $545.1 million in the reported quarter. Underwriting profit was $39.3 million, down 31.4% year over year. Combined ratio deteriorated 400 bps year over year to 93% in the quarter.
International Insurance: Net written premiums dipped 0.4% year over year to $225.4 million. Underwriting profit skyrocketed 123.1% year over year to $24.4 million in the quarter. Combined ratio improved 700 bps year over year to 88% in the quarter.
Reinsurance Segment: Net written premiums increased 21.6% year over year to $489.6 million. Underwriting loss was $71.3 million in the reported quarter, which compared unfavorably with underwriting profit of about $37 million in the year-ago quarter. Combined ratio deteriorated 5000 bps year over year to 132% in the quarter.
Other Insurance (Discontinued Lines) Segment: Net written premiums of $0.1 million jumped 28.9% from the prior-year quarter. Underwriting profit of $5.3 million plummeted 61.9% year over year.
Markel exited the first quarter with total cash, cash equivalents and investments of $19.1 billion compared with $18.7 billion at year-end 2016. Book value per share rose 2.3% from year-end 2016 to $620.30 as of Mar 31, 2017. Net cash from operating activities was $11.9 million, which compared favorably with net loss from operating activities of $104.6 million at year-end 2016.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
Markel Corporation Price and Consensus
At this time, the stock has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It comes with little surprise that the stock sports a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.