Estimates for Everest Re Group Ltd (RE - Free Report) have been revised upward over the past 60 days, reflecting analysts’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 earnings being raised nearly 4% to $21.12.
Everest Re’s return on equity of 14.4% betters the industry average of 8.6%. Return on equity, a profitability measure denoting how effectively the company is utilizing its shareholders’ money. Also, since its IPO in 1995, the company’s compound annual growth rate of book value per share has grown by 12%.
Shares of this Zacks Rank #3 (Hold) P&C insurer have gained 4.2% year to date against the industry’s decline of 4.5%.
Let’s focus on the factors that make Everest Re a stock to invest in for greater returns to your portfolio.
Growth Initiatives: Growth initiatives such as deployment of increased capacity to deals with attractive pricing terms, diversify product offering and distribution abilities along with advanced capital and hedging capabilities are some of the company’s actions taken to bolster its performance at the Reinsurance segment. Further, creating strategic relationships across the company is likely to improve growth in this segment.
Better Performing Insurance Segment: Diversified product offering, strengthening of the property insurance geographic footprint, international insurance expansion as well as staffing up underwriting operations are some of the factors that have helped the Insurance segment perform steadily. Banking on these positives, we expect the company to continue this momentum in the near term.
Better Investment Results: Investment income, a major contributor to insurers’ top line, has been improving over the past few years owing to rising interest rates, improved limited partnership income along with a well-balanced portfolio. The P&C insurer anticipates witnessing better investment results in the near term, backed by a slow but steady improving pace of interest rates and an increased focus on limited partnership investment.
Top-Line Growth: On the back of improving investment income and premium growth, the company has been witnessing an upward trend pertaining to its top line. We expect this momentum continue, which in turn should accelerate its overall growth.
Effective Capital Deployment: A strong capital position aids the company to return value to its shareholders via dividend hikes and share buybacks, raising optimism on the stock among investors. While the company had 1.8 million shares left under its buyback authorization as of Mar 31, 2018, it regularly increases dividend. Its dividend yield of 2.2% betters the sector average of 1.9%, making the stock an attractive pick for yield-seeking investors.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $21.12, representing a whopping year-over-year increase of about 132.1% on 13.1% higher revenues of $7.3 billion. The expected long-term earnings growth is pegged at 10%.
Positive Earnings Surprise History: The company dwells on a decent earnings surprise history, exceeding the Zacks Consensus Estimate in three of the trailing four quarters with an average beat of 39.64%.
Underpriced: Looking at the company’s price-to-book ratio, the best multiple for valuing insurers because of large variations in their earnings results from one quarter to the next, shares are currently trading at a level lower than the industry average. The company has a trailing 12-month P/B ratio of 1.13, falling noticeably below the industry average of 1.34.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Argo Group International Holdings, Ltd. (ARGO - Free Report) , The Navigators Group, Inc. (NAVG - Free Report) and The Progressive Corporation (PGR - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Argo Group underwrites specialty insurance and reinsurance products in the property and casualty markets. The company delivered positive surprises in three of the last four quarters with an average beat of 11.87%.
Navigators Group underwrites marine, property and casualty plus professional liability insurance products and services in the United States and internationally. The company came up with positive earnings surprises in three of the last four quarters with an average beat of 14.66%.
Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance as well as related services, primarily in the United States. The company pulled off positive surprises in three of the last four quarters with an average beat of 6.23%.
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