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Homeowners Choice: A Strong Buy

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On Mar 13, Zacks Investment Research upgraded Homeowners Choice Inc. (HCI - Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Homeowners Choice has been witnessing rising earnings estimates on the back of strong fourth-quarter 2012 results, which included a 67.6% positive earnings surprise. Moreover, this property and casualty insurer delivered positive earnings surprises in all 4 quarters of 2012 with an average beat of 35.4%.

The year-to-date return for the stock came in at 20.2%, way above the S&P 500 return of 2.3%.

Homeowners reported its fourth-quarter results on Mar 5. Non-GAAP earnings per share came in at $1.19 surpassing the Zacks Consensus Estimate of 70 cents. Results also improved 85.9% year over year from 64 cents in 2011. It also marked HCI’s 21st consecutive quarter of profitability

Top line improved 39.7% year over year to $51.1 million, driven by strong improvement in net premiums earned (up 38.3% year over year).

Additionally, the Homeowners dividend of 22.5 cents per share produces a dividend yield of 3.53% which is better than the industry average of 2.09%. In the fourth quarter of 2012, the company also paid a special dividend of 10 cents per share.

The Zacks Consensus Estimate for 2013 increased 3.3% to $3.11 per share as 1 of 3 estimates was revised higher over the last 7 days. The estimate also represents a year-over-year increase of 2.87%. The Zacks Consensus Estimate for 2014 is pegged at $2.89.

Other Stocks to Consider

Other property and casualty insurers like Arch Capital Group Ltd. (ACGL - Free Report) , XL Group Plc (XL - Free Report) and Navigators Group Inc. (NAVG - Free Report) , carry a Zacks Rank #1 (Strong Buy) and are worth noting.

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