A month has gone by since the last earnings report for XL Group (XL). Shares have added about 1.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is XL due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
XL Group Q2 Earnings Miss Estimates, Revenues Beat
XL Group Ltd reported second-quarter 2018 operating net income of 84 cents per share, which missed the Zacks Consensus Estimate by 6.7%. Moreover, the bottom line declined 12.5% from the prior-year quarter. Higher level of non-catastrophe loss, increase in expenses along with prior-year development from short tail lines in Insurance, were mainly responsible for the downside.
Nonetheless, the quarter witnessed top-line growth, favorable underwriting performance and better investment results.
Including non-recurring items, the company delivered net income of $1.21 per share, which grew 6.1% from the year-ago period. Behind Second-Quarter Headlines
Total revenues of XL Group improved 7.3% year over year to $2.9 billion owing to higher net premiums earned as well as net investment income. Also, the top line beat the Zacks Consensus Estimate by 1.2%.
Net premiums earned rose 7.1% year over year to $2.7 billion.
Net investment income improved 11.1% year over year to $231.8 million.
Pretax cat loss, net of reinsurance and reinstatement premiums were $76.8 million. The reported figure was noticeably narrower than $92.1 million incurred in the prior-year period.
Total expenses of XL Group increased 8.8% year over year to $2.7 billion due to substantially higher net loss and loss expenses incurred, claims and policy benefits as well as acquisition costs.
With respect to Property and Casualty operations, gross premiums written in the second quarter improved 10.6% year over year to $3.9 billion.
The insurance segment witnessed improvement in premiums, attributable to increase in rates and new business in Global Lines, Property and Financial Lines in International and Property and Construction in North America.
The reinsurance segment experienced growth in premiums in the quarter under consideration on the back of improved rates as well as new business.
XL Group reported underwriting profit of $114.2 million, which plunged nearly 41.3% from the year-earlier quarter. Combined ratio deteriorated 350 basis points to 95.8% in the quarter under review. Financial Update
XL Group exited the second quarter with cash and cash equivalents of $2.9 billion, down 15.5% from $3.4 billion at the end of 2017.
Notes payable and debt at the end of the quarter were $3.2 billion, down 0.1% from the year-end 2017.
As of Jun 30, 2018, book value of XL Group was $36.56 per share, down 3.9% from the level as of Dec 31, 2017. Share Repurchase Update
In the second quarter, the company did not participate in any share buyback program under its current share repurchase authorization. As of Jun 30, 2018, XL Group had shares worth $529.1 million left under its authorized program.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
At this time, XL has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
XL has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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