On Aug 5, Zacks Investment Research upgraded
Mercury General Corp.
) by a notch to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Mercury General has been witnessing rising earnings estimates on
the back of strong second quarter earnings, which benefited from
improved core business and lower-than-expected catastrophe losses.
The company's solid growth outlook and healthy capital position
have been supported by bullish market trends.
Additionally, this multi-line property-casualty insurer
delivered positive earnings surprises in the last two quarters,
marking an average beat of 23.1% in 2014.
On Jul 28, Mercury General reported second-quarter 2014
operating earnings per share (EPS) of 83 cents, beating the Zacks
Consensus Estimate of 67 cents by 23.9%. EPS was also significantly
higher than year-ago figure of 63 cents.
The upside was driven by 25.6% year-over-year growth in
revenues, reflecting improved premiums for the 14
consecutive quarter. Higher premiums along with lower loss and loss
adjusted expenses as well as reduced catastrophe losses (down
84.6%) bolstered the underwriting results. This was reflected in
combined ratio that improved to 96.0% from 98.7% in the year-ago
Higher net realized gains against losses in the year-ago quarter
also supported results. Despite the prevalent low interest
environment, Mercury General's investment portfolio remains stable.
Subsequently, the book value per share improved 5.6% in the
The various initiatives taken in California are also bearing
fruit. Going ahead, a healthy balance sheet, fair liquidity and
sturdy fundamentals are expected to mitigate market risks and drive
operating leverage in the upcoming quarters, while modest
shareholder return instill positive sentiment among investors.
Following Mercury General's second-quarter earnings, the company
witnessed upward estimate revisions, reflecting optimism. The Zacks
Consensus Estimate for 2014 and 2015 rose 6.7% and 3.2% to $2.72
and $2.61 per share respectively in the last 7 days. Notably, there
was no downward estimate revision for both the years.
Moreover, the Most Accurate estimate for Mercury General's 2015
earnings currently stands at $2.67 a share, which translates into
of +2.3%. This indicates the possibility of an earnings beat next
Other Stocks to Consider
Investors interested in the insurance industry could also
consider stocks like AmTrust Financial Services, Inc. (
), Greenlight Capital Re Ltd. (
) and Endurance Specialty Holdings Ltd. (
). All of these have the same Zacks Rank as Mercury General.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
MERCURY GENL CP (MCY): Free Stock Analysis
GREENLIGHT CAP (GLRE): Free Stock Analysis
AMTRUST FIN SVC (AFSI): Free Stock Analysis
ENDURANCE SPLTY (ENH): Free Stock Analysis
To read this article on Zacks.com click here.