On Jan 7, 2014, Zacks Investment Research downgraded
Fortegra Financial Corporation
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Fortegra Financial has been experiencing declining earnings
estimates on the back of sluggish third-quarter 2013 results and
its recent divestments. The company also delivered negative
earnings surprises in 3 of the last 4 quarters with an average of
Additionally, this multi-line insurer underperformed the
one-year S&P 500 index, which posed a growth of 24.6% against
a negative return of 7.2% clocked by the company.
On Nov 1, Fortegra Financial reported third-quarter 2013
operating earnings per share of 19 cents, which missedthe Zacks
Consensus Estimate by a penny. However, earnings were at par with
the prior-year quarter figure.
Although higher service and administrative fees drove top-line
growth by 14.5%, higher benefit claims as well as lower brokerage
and ceding commissions marred the desired upside. Moreover, total
expenses escalated 22.3%, due to higher personnel and operating
costs. Consequently, net income plunged about 20% during the
quarter along with a deteriorated EBITDA margin.
Given the uncertainty related to the regulations, sluggish
market conditions and increasing claims and expenses vis-à-vis
nominal top-line growth, we believe Fortegra Financial's target
of achieving its long-term goal of expansion appears delusionary.
Although the divestment of its subsidiaries -Bliss & Glennon
(B&G) and eReinsure to AmWINS Group Inc. -at the end of Dec
2013 inflated liquidity, it has also contracted the company's
operations, thereby showing no positive reaction among
Meanwhile, the Zacks Consensus Estimate for 2013 declined 4.7%
to 82 cents per share in the last 60 days. The same for 2014 also
moved south 4.1% to 93 cents a share during the same period. No
upward revision in estimates was witnessed for either year.
Other Stocks to Consider
While we prefer to avoid Fortegra Financialfor the time being,
some better-ranked insurers in the industry are
American International Group Inc.
CNO Financial Group Inc.
). All these stocks sport a Zacks Rank #1 (Strong Buy).
AMER INTL GRP (AIG): Free Stock Analysis
CNO FINL GRP (CNO): Free Stock Analysis
FORTEGA FIN CP (FRF): Free Stock Analysis
PRUDENTIAL PLC (PUK): Free Stock Analysis
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