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Markel (MKL) Up 2.5% 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 2.5% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Markel (MKL - Free Report) Q3 Earnings and Revenues Surpass Estimates

Markel Corporation delivered third-quarter 2018 income of $28.50 per share, surpassing the Zacks Consensus Estimate of $7.61. Moreover, the bottom line reversed the year-ago quarter’s loss of $18.82 per share.

The company witnessed higher revenues as well as improved premiums at the Insurance and Reinsurance segments. However, an increase in expenses was a dampener.

Operational Update

Total operating revenues of $1.8 billion exceeded the Zacks Consensus Estimate by 2.4%. Also, the top line improved 17.1% year over year on higher premiums, investment income and other revenues.

Total operating expenses of Markel increased about 8.5% year over year to $1.7 billion.

Markel’s combined ratio improved 3500 basis points (bps) year over year to 99% in the reported quarter.

Segment Update

Insurance: Net written premiums were up 12.5% year over year to $1 billion in the quarter under review.

Underwriting profit came in at $42.5 million against the year-ago quarter’s loss of $159.5 million.

Combined ratio improved 2300 bps year over year to 96% in the quarter under discussion.

Reinsurance: Net written premiums rose 3% year over year to $195.3 million.

Underwriting loss of $33.7 million was significantly narrower than the year-ago quarter’s loss of $214.3 million.

Combined ratio improved 6800 bps year over year to 115% in the third quarter.

Financial Update

Markel exited the third quarter with investments, cash and cash equivalents plus restricted cash and cash equivalents of 21 billion, up 2.3% from the level at year-end 2017.

Debt balance decreased 3.4% to $2.9 billion as of Sep 30, 2018 from $3.1 billion at 2017 end.

Book value per share grew 3.1% from the tally at year-end 2017 to $704.70 as of Sep 30, 2018.

Net cash from operating activities for nine months ended Sep 30, 2018 was $307.5 million, up 27.5% from the same period in 2017.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -44.21% due to these changes.

VGM Scores

Currently, Markel has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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