Radian Group Upgraded to Buy on Solid Q2 Results - Analyst Blog

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On Aug 22, 2014, Zacks Investment Research upgraded Radian Group Inc. ( RDN ) to a Zacks Rank #2 (Buy).

Why the Upgrade?

Radian Group has been witnessing rising earnings estimates on the back of strong second-quarter 2014 results. Moreover, this well-known multi-line insurer delivered positive earnings surprises in two consecutive quarters with an average beat of 68.5%.

On Aug 7, Radian Group reported second-quarter 2014 operating net income of 33 cents that surpassed the Zacks Consensus Estimate of 26 cents by 27% and also rebounded from the year-ago quarter loss of 3 cents. The upside was primarily due to solid credit trends for the mortgage insurance (MI) business and successful closure of the Clayton acquisition.

Another driving factor for Radian Group was the improvement in high quality mortgage insurance in force. Moreover, the continued positive impact of the MI book of business, along with improvement in credit performance of MI book, helped the company to witness the fifth consecutive month of new business growth. This also led to improvement in the credit profile.

The Clayton acquisition resulted in a source of fee-based revenues for Radian Group. It also benefited the MI business by increasing its participation in the residential mortgage market value chain.

The Clayton acquisition and continuous growth in the MI book of business drove year-over-year growth in revenues, which also surpassed the Zacks Consensus Estimate by 0.5%.

Delinquent loans dropped by 38% year-over-year, which were already declining steadily since 2009 and marked the lowest rate since 2007.

Expenses in the quarter declined 28% year over year due to a decline in the provision for losses, change in reserve for premium deficiency and policy acquisition costs.

The Zacks Consensus Estimate for 2014 moved north by 20.6% to $2.11 as three out of four analysts raised their estimates. For 2015, the Zacks Consensus Estimate rose 1.3% to $1.53 as one out of three analysts revised their estimates upward.

Other Stocks to Consider

Investors interested in the insurance industry could consider stocks like BB Seguridade Participa ( BBSEY ), Fortegra Financial Corp. ( FRF ) and Health Insurance Innovations, Inc. ( HIIQ ). All of these have the same Zacks Rank as Radian Group.

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FORTEGA FIN CP (FRF): Free Stock Analysis Report


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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