Back to top

Image: Bigstock

Kemper (KMPR) Hits 52-Week High: Will the Stock Rally Ahead?

Read MoreHide Full Article

Shares of Kemper Corporation (KMPR - Free Report) hit a new 52-week high of $75 on May 16, gaining traction from a strong first-quarter 2018 earnings release.  About 0.4 million shares exchanged hands in the last trading session and the stock finally closed at $74.75, inching up 1.7%. The company’s return on equity has been an impressive 9.1% when compared with the industry average of 4.8%.

Solid Q1 Results

Kemper’s bottom line of $1.10 outpaced the Zacks Consensus Estimate by 59.4% and rebounded from the year-ago loss of 8 cents.

Earned premiums increased 8% on the strength of policies-in-force growth and higher premiums earned in non-standard auto business.

Underlying combined ratio improved 470 bps on higher rates, lower claims and prudent underwriting actions.

Shares of the company have rallied 11.1% since it posted strong first-quarter results, outperforming the industry’s decline of 0.6%. This Zacks Rank #1 (Strong Buy) insurer flaunts a stellar surprise history, beating estimates for six straight quarters with an average beat of 96.3%.

 

 

Why Should the Stock Continue the Bull Run?

Kemper’s pending acquisitions of Infinity Property and Casualty Corporation will consolidate its leading position in nonstandard auto business. The buyouts will be accretive to the aquirer’s bottom line by 10%, to return on average common equity by more than 30 basis points (bps) and to return on average tangible common equity by more than 400 bps in the second year. Also, the buyer will benefit from annual pre-tax cost savings of about $55 million and an additional $5-$10 million of pre-tax earnings, resulting from the repositioning of Infinity’s investment portfolio.

Kemper remains focused on consolidating its care capabilities and at the same time, leveraging its competitive advantages.

Its diversified investment portfolio lends support to the top line.

Additionally, the company boasts a strong capital and liquidity position with debt-to-capital ratio of 22.3%, cushioning its financial flexibility.

Further, its dividend yield of 1.28% betters the industry average of 0.8%, thereby making it an attractive pick for yield-seeking investors.

The Zacks Consensus Estimate for 2018 reflects a significant 164.6% increase on 4.3% higher revenues. The consensus mark for both revenues and earnings per share in 2019 translates into a year-over-year rise of 5.5%.

Over the last 30 days, the consensus estimate has moved north by 16.7% for 2018 and 7.5% for 2019 as most analysts have raised their estimates.

Kemper has a favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors. Backtested results show that stocks with an impressive VGM Score of A or B coupled with a bullish Zacks Rank offer the best investment bets.

Other Stocks to Consider

Investors interested in other stocks worth considering from the insurance industry can also consider MetLife Inc. (MET - Free Report) and Alleghany Corporation .

MetLife engages in the insurance, annuities, employee benefits and asset management businesses. The company has an average positive surprise of 9.96% in the last four quarters. The stock carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company has an average beat of 3.59% in the trailing four quarters. The stock has a Zacks Rank of 2 (Buy).

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


MetLife, Inc. (MET) - $25 value - yours FREE >>

Kemper Corporation (KMPR) - $25 value - yours FREE >>

Published in