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Why Is Radian Group (RDN) Down 1.8% Since the Last Earnings Report?

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About a month has gone by since the last earnings report for Radian Group Inc. (RDN - Free Report) . Shares have lost about 1.8% in that time frame.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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.

Radian Group Q2 Earnings Top Estimates, Revenues Rise

Radian Group Inc.’s second-quarter 2017 operating income of $0.48 per share beat the Zacks Consensus Estimate by 20%. Also, the bottom line improved 26.3% year over year.  

Behind the Headlines

Operating revenues grew 3% year over year to $260 million, courtesy of higher net premiums. However, lower investment income and service revenues suffered a decline.

New mortgage insurance written (NIW) grew 11% year over year to $14.3 billion in the quarter. As of Jun 30, 2017, total primary mortgage insurance in force was $191.6 billion, up 8% from $177.7 million as of Jun 30, 2016.

Persistency, which is the percentage of mortgage insurance in force that remains in the company’s books after a 12-month period, was 78.5% as of Jun 30, 2017. The company reported persistency of 79.9% as of Jun 30, 2016.

Primary delinquent loans decreased 20% year over year in the quarter.

Total expenses surged 92% year over year to $338 million, primarily due to impairment of goodwill and amortization of intangible assets in the quarter.

Segment Update

Net premiums earned by Mortgage Insurance segment were $229 million, up 3% year over year. Claims paid were $91.3 million in the quarter, up 1% year over year. Loss ratio improved 1420 basis points to 7.7%.

The Mortgage and Real Estate Services segment reported 5% year-over-year decline in total revenue to $40 million. Pre-tax operating income of $1.2 million was lower than an operating income of $1.5 million in the year-ago quarter.

Financial Update

Radian Group ended the quarter with a cash balance of $56.9 million, up 3% year over year.

Long-term debt was $989 million, down 23% year over year.

Book value per share, a measure of net worth, grew 3% year over year to $13.54 as of Jun 30, 2017.

Business Update

The company expects to restructure its business. Restructuring charges are likely to be within $25 million on a pre-tax basis.

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

Radian Group Inc. Price and Consensus

 

Radian Group Inc. Price and Consensus | Radian Group Inc. Quote

VGM Scores

At this time, Radian Group's stock has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated also a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value, growth, and momentum investors.

Outlook

While estimates have been trending upward for the stock, the magnitude of this revisionhas been net zero. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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