A month has gone by since the last earnings report for Radian Group Inc. (RDN - Free Report) . Shares have added about 10% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is RDN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Radian Group Q1 Earnings and Revenues Beat Estimates
Radian Group Inc.’s first-quarter 2018 operating income of 59 cents per share beat the Zacks Consensus Estimate by 1.7%. The bottom line also improved 59.5% year over year.
The company benefited from a solid performance at its Mortgage Insurance segment. It continued to grow its insurance in force portfolio, which forms a major driver of future earnings.
Net income per share of 52 cents surged 52.9% from the year-ago quarter.
Behind the Headlines
Operating revenues grew 9.4% year over year to $277.3 million, courtesy of higher net premiums and investment income as well as other income. Revenues outpaced the Zacks Consensus Estimate by 0.7%. Total revenues (including services revenues and net loss on investments and other financial instruments) came in at $291.6 million, up nearly 1% year over year.
Total net premiums earned were $242.6 million, up nearly 9.4% year over year.
New mortgage insurance written grew 15.8% year over year to $11.7 billion in the quarter under review. As of Mar 31, 2018, total primary mortgage insurance in force was $204.0 billion, up 10% from $185.9 million as of Mar 31, 2017.
Persistency — percentage of mortgage insurance in force that remains in the company’s books after a 12-month period — was 81.0% as of Mar 31, 2018. The company reported a persistency of 84.4% as of Mar 31, 2017.
Primary delinquent loans were 24,597, down 4.6% year over year in the first quarter.
Total expenses decreased 14.3% year over year to $149.1 million, primarily on lower provision for loss, cost of services, other operating expenses, interest expense and amortization plus impairment of other intangible assets.
Net premiums earned by Mortgage Insurance segment were $242.6 million, up nearly 9.4% year over year. Claims paid were $59.9 million in the quarter under review, down 27% year over year. Loss ratio improved 590 basis points to 15.4%.
The Mortgage and Real Estate Services segment reported 14.8% year-over-year decline in total revenues to $34.2 million. Pre-tax operating loss of $0.4 million was narrower than the year-ago loss of $1.2 million.
Restructuring charge was of $0.5 million in the reported quarter. Additional pre-tax charges of about $0.6 million were incurred with additional charges of about $3.1 million expected to be incurred and acknowledged by Dec 31, 2018.
As of Mar 31, 2018, Radian Group had a solid cash balance of $122.5 million, up 66.2% year over year.
Long-term debt was $1 billion, up nearly 1.9% year over year.
Book value per share, a measure of net worth, grew 4.3% year over year to $14.16 as of Mar 31, 2018.
Share Repurchase Update
In the first quarter of 2018, Radian Group bought back 0.5 million shares worth $10 million.
In April, the company bought back additional 0.9 million shares worth $15 million. Under the current share buyback program, expiring Jul 31, 2018, the company can repurchase shares up to an amount of $25 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
At this time, RDN has a strong Growth Score of A, a grade with the same score on the momentum front. The stock was allocated a grade of B on the value side, putting it in the top 40% 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 more suitable for growth and momentum investors than value investors.
Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. It's no surprise RDN has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.