Arch Capital Up to Strong Buy Ahead of Q2 Earnings Release - Analyst Blog

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On Jul 18, Zacks Investment Research upgraded Arch Capital Group Ltd. ( ACGL ) by a notch to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Arch Capital has been witnessing rising earnings estimates on the back of improving core businesses. A diversified product portfolio and healthy capital position have been supported by bullish market trends in the near past.


Additionally, this property-casualty reinsurer delivered positive earnings surprises in three of the last four quarters with an average beat of 10.2%.

On May 1, Arch Capital reported first-quarter 2014 operating earnings per share (EPS) of $1.20, 15.4% higher than the Zacks Consensus Estimate of $1.04. EPS was also higher than year-ago figure of $1.17.  

The upside was driven by 14.2% year-over-year growth in premiums and 13.8% upsurge in underwriting income along with stable combined ratio and net investment yield, despite the prevalent low interest environment. These were partially offset by higher expenses. Subsequently, the book value per share improved 4.3% during the quarter.

Arch Capital enjoys fair liquidity and risk-adjusted capital, thereby supporting a low-risk balance sheet. Going ahead, sturdy fundamentals and profitable writing of mortgage and insurance businesses are expected to mitigate market risks and drive operating leverage in the upcoming quarters, instilling a positive sentiment among investors.

Upward estimate revisions witnessed by Arch Capital also reflect optimism. The Zacks Consensus Estimate for 2014 and 2015 rose 3.6% and 2.0% to $3.79 and $3.60 per share in the last 60 days, respectively. Notably, no downward estimate revision was witnessed for both the years.

Moreover, the Most Accurate estimate for Arch Capital's 2014 and 2015 earnings currently stand at $3.84 and $3.83 a share, translating into an Earnings ESP of +1.3% and +6.4%, respectively. This indicates earnings beat possibilities for this year and the next.

Other Stocks to Consider

Investors interested in the insurance industry could consider well-performing stocks like Manulife Financial Corp. ( MFC ), Greenlight Capital Re Ltd. ( GLRE ) and Endurance Specialty Holdings Ltd. ( ENH ) with the same Zacks Rank as Arch Capital.


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GREENLIGHT CAP (GLRE): Free Stock Analysis Report

ENDURANCE SPLTY (ENH): Free Stock Analysis Report

ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: EPS , MFC , GLRE , ENH , ACGL

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