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Markel (MKL) Up 0.3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Markel (MKL - Free Report) . Shares have added about 0.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Markel 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 drivers.

Markel Q2 Earnings & Revenues Top Estimates, Up Y/Y

Markel Corporation delivered second-quarter 2018 income of $19.97 per share, surpassing the Zacks Consensus Estimate of $8.49. Moreover, the bottom line more than doubled year over year.

The company witnessed higher revenues and improved premiums at the Insurance segment. However, increase in expenses was a dampener.

Operational Update

Total operating revenues of $1.8 billion exceeded the Zacks Consensus Estimate by 11.7%. Also, the top line improved 28.6% year over year on higher premiums, investment income and other revenues.

Total operating expenses of Markel escalated about 35% year over year to $1.7 billion.

Markel’s combined ratio deteriorated 300 basis points (bps) year over year to 92% in the reported quarter.

Segment Update

Insurance: Net written premiums were up 9.1% year over year to $1 billion in the quarter under review.

Underwriting profit was nearly $74.3 million, down 0.2% year over year.

Combined ratio improved 100 bps year over year to 92% in the quarter under discussion.

Reinsurance: Net written premiums declined about 18.9% year over year to $208.8 million.

Underwriting profit was nearly $23.6 million, down 31% year over year.

Combined ratio deteriorated 500 bps year over year to 90% in the second quarter.    

Financial Update

Markel exited the second quarter with investments, cash and cash equivalents plus restricted cash and cash equivalents of $20.4 billion, down 0.8% from the level at year-end 2017.

Debt balance decreased 2.4% to $3 billion as of Jun 30, 2018 from $3.1 billion at 2017 end.

Book value per share slipped 1.8% from the tally at year-end 2017 to $682.76 as of Jun 30, 2018.

Net cash from operating activities for the first half was $307.5 million, up 29.2% year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Markel has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Markel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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