On Feb 22, Zacks Investment Research downgraded
Meadowbrook Insurance Group Inc.
) to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #3
Why the Downgrade?
Earnings estimates for Meadowbrook have declined owing to
disappointing fourth-quarter 2013 results, higher debt and
reduced investment returns. The company has delivered negative
earnings surprises for 3 straight quarters, with an average miss
Additionally, this multi-line property-casualty and specialty
insurer underperformed the one-year S&P 500 index, which
posted growth of 21.9% against a negative return of 25% clocked
On Feb 18, Meadowbrook reported fourth-quarter operating loss
per share of 30 cents. Results desperately lagged earnings of a
penny in the year-ago quarter and the Zacks Consensus Estimate of
earnings of 12 cents.
A year-over-year fall of 11.4% in total expense was more than
offset by 34.4% plunge in the top line, due to substantially weak
premiums earned and net realized investment gains. Also, combined
ratio, operating cash flow and book value per share witnessed
deterioration, while debt remained elevated, weakening leverage.
No shares were bought back in 2013.
Further adding to the investors' jitters, management pegged
gross written premiums for 2014 in the band of $775−800 million,
substantially lower than $944 million earned in 2013.
Following the earnings release, the Zacks Consensus Estimate
for 2014 plunged 19.2% to 42 cents per share in the last 7 days.
Moreover, the estimate for 2015 is pegged at 58 cents a share,
down 14.7% during the same period. This reflects a cautious
estimate, below the company's earnings guidance of 50−70 cents
per share for 2014.
Meanwhile, the Most Accurate estimate for Meadowbrook's 2014
and 2015 earnings stands at 25 cents and 40 cents a share,
resulting in an
of -40.5% and -31.0%, respectively. No upward revision in
estimates was witnessed for both the years.
Other Stocks to Consider
While we prefer to avoid Meadowbrook at present, some
top-ranked insurers worth considering are
I). All these stocks sport a Zacks Rank #1 (Strong Buy).
ACE LIMITED (ACE): Free Stock Analysis Report
AEGON N V (AEG): Free Stock Analysis Report
MEADOWBROOK INS (MIG): Free Stock Analysis
RALPH LAUREN CP (RL): Free Stock Analysis
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