On Mar 19, Zacks Investment Research upgraded
Mercury General Corp.
by two notches straight to a Zacks Rank #5 (Strong Sell) from a
Zacks Rank #3 (Hold).
Why the Downgrade?
Mercury General has been witnessing declining earnings estimates
eversince it announced dismal fourth-quarter 2014 results on Feb 9,
whereby the company reported an operating loss of 13 cents per
share. Results significantly lagged the Zacks Consensus Estimate of
earnings of 39 cents and the year-ago earnings of 33 cents, thus
delivering an average earnings miss of 13.6% for the trailing four
Higher catastrophe losses (300%) and total expenses more than
offset the 4.4% increase in net written premiums and deteriorated
the combined ratio to 105.6% from 102.5% in the year-ago quarter as
well as the loss ratio. Even investment yields remained sluggish at
3.5% against 3.7% in the prior-year quarter.
Additionally, an elevated debt profile at 2014-end weakened the
financial leverage. Subsequently, the debt-to-capital ratio
deteriorated to 13.4% from 9.4% at 2013-end, implying significant
Following Mercury General's fourth-quarter earnings, the company
witnessed downward estimate revisions, reflecting a lackluster
outlook. The Zacks Consensus Estimate for 2015 skid 5.3% to $2.51
per share in the last 60 days, while the same remained intact at
$2.72 for 2016.
Moreover, the Most Accurate estimate for Mercury General's 2015
earnings currently stands at $2.46 a share, which translates into
of -2.0%. This indicates the possibility of an earnings miss this
Other Stocks to Consider
Investors interested in the insurance industry could consider
stocks like AmTrust Financial Services Inc.
, Fidelity National Financial Inc.
and Arch Capital Group Ltd.
. All of these stocks sport a Zacks Rank #1 (Strong Buy).
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MERCURY GENL CP (MCY): Free Stock Analysis
AMTRUST FIN SVC (AFSI): Free Stock Analysis
FNF GROUP (FNF): Free Stock Analysis Report
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