It has been about a month since the last earnings report for MGIC Investment Corporation (MTG - Free Report) . Shares have added about 3% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is MTG 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.
MGIC Investment (MTG - Free Report) Q1 Earnings Top on Lower Expenses & Tax
MGIC Investment Corp reported first-quarter 2018 operating net income per share of 38 cents, surpassing the Zacks Consensus Estimate by 8.57%. The bottom line improved 22.6% year over year on higher revenues and lower loss.
Insurance in force as well as investment income rose while claims and primary delinquent inventory declined year over year. Also, persistency increased and a lower tax rate added to the upside.
MGIC Investment recorded total operating revenues of $266 million, inching up about 1.9% year over year on higher net investment income (up 8.7%) and higher premiums (up nearly 1.3%). The top line missed the Zacks Consensus Estimate of $274 million.
Increase in net premiums earned was driven by an increase in insurance in force offset by a lower effective premium yield.
New insurance written was $10.6 billion in the reported quarter, having increased nearly 14% year over year.
As of Mar 31, 2018, the company’s primary insurance in force was $197.5 billion, up 7.6% year over year.
Persistency or the percentage of insurance remaining in force from the preceding year was 80.2% as of Mar 31, 2018, expanding 330 basis points year over year.
Primary delinquent inventory declined 9.1% year over year to 41,243 loans on Mar 31, 2018.
Net underwriting and other expenses totaled $48.7 million, up 13.3% year over year. Total loss and expenses declined 13.6% year over year to $85.7 million due to 13.6% reduced loss and 180.9% lower interest expenses.
Loss ratio was 10.3% in the quarter under review, contracting 180 basis points. Underwriting expense ratio of 19.5% deteriorated 250 basis points year over year.
MGIC Investment expects new business worth $50 billion in 2018, banking on a strong purchase mortgage market and potential share gain from the Federal Housing Administration.
Book value per share, a measure of net worth, grew nearly 2.2% year over year to $8.70 as of Mar 31, 2018.
As of Mar 31, 2018, MGIC Investment had $257 million in cash and investments, down 43% year over year.
Risk-to-capital ratio was 10.3:1 as of Mar 31, 2018 compared with 11.6:1 as of Mar 31, 2017.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been two revisions lower for the current quarter.
At this time, MTG has a nice Growth Score of B, a grade with the same score on the momentum front. The stock was also allocated 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.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise MTG has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.