MGIC Stays Neutral - Analyst Blog


We retain MGIC Investment Corp. ( MTG ) at Neutral. Though the company reported operating profit in the quarter and did significantly well compared to the Zacks Consensus Estimate, headwinds such as low interest rates and lack of a robust economic recovery keep us on the side lines.

Why reiteration?

Counting the positives, MGIC reported its second quarterly profit since the second quarter of 2010. Third quarter 2013 operating profit of 4 cents per share compared favorably with the Zacks Consensus Estimate of a loss of 12 cents per share. MGIC had reported an operating loss of $1.25 per share in the year-ago quarter. Results were aided by lower claims rate on early-stage delinquencies, combined with a decreasing level of new notices.

MGIC witnessed rising earnings estimates. Over the last 60 days, the Zacks Consensus Estimate for 2013 narrowed to a loss of 27 cents per share from a loss of 46 cents per share as all the 3 estimates improved. For 2014, EPS estimates improved by 18.4% to 45 cents as 2 of 5 estimates were raised over the same time frame.

We believe an improving housing market, along with the outstanding credit quality of the company's new business and its industry's growing share of business from the Federal Housing Authority (FHA), offers an environment for gradual growth at MGIC.

Additionally, the quality of the new business written by the company has improved. This Zacks Rank #2 (Buy) private mortgage insurer continues to grow its share of new business.

On the tepid side MGIC's net investment income has been under pressure which is expected to continue in the near term.

Other Stocks

Some other stocks such as Old Republic International Corp. ( ORI ) with Zacks Rank #1 (Strong Buy), Assurant Inc. ( AIZ ) and Arch Capital Group Ltd. ( ACGL ), both with Zacks Rank #2 (Buy) are worth considering.

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

ASSURANT INC (AIZ): Free Stock Analysis Report

MGIC INVSTMT CP (MTG): Free Stock Analysis Report

OLD REP INTL (ORI): Free Stock Analysis Report

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Zacks Investment Research

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 , Stocks

Referenced Stocks: ACGL , AIZ , MTG , ORI

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